IRAQ MINISTRY OF OIL QUIETLY OFFERS CONTRACTS

S E C R E T BAGHDAD 003332

NOFORN

SIPDIS

DOE FOR MFALKOWSKI, CDAY, SHUTCHINS

E.O. 12958: DECL: 10/16/2018
TAGS: EINV ENRG EPET IZ
SUBJECT: IRAQ MINISTRY OF OIL QUIETLY OFFERS CONTRACTS
DIRECTLY TO COMPANIES

REF: BAGHDAD 03241

Classified By: CETI Ambassador Marc Wall, reasons 1.4(b,d)


1. (S//NF) Summary: Iraqi Deputy Minister of Oil (MoO) for
Upstream Affairs, Abdul Sahib Al-Qutub, sent three identical
letters to Repsol YPE, Nippon Oil Exploration Limited, and
Eni S.p.A. requesting a detailed proposal for developing the
Nasiriya oil field under a two-year Engineering, Procurement,
and Construction (EPC) type of contract. According to MoO
Officials, this is not a one time deal and similar EPC
contracts will be directly offered to other companies as
well. The EPC contracts are separate from the Producing
Field Technical Service Contracts (PFTSC) for which
pre-qualified companies received bidding packages at the 13
October meeting in London. This type of contract negotiation
conflicts with Minister of Oil Husayn al-Shahristani's recent
statements boasting transparent and competitive oil
contracts. End Summary

A New Type of MoO Oil Contract
--------------


2. (S//NF) In a meeting led by Deputy Minister Qutub on 15
September, it was decided that an EPC type of contract would
be used to develop the Nasiriya oil field. This contract
would require the oil company to completely develop the field
to full production within two years. Full production for the
Nasiriya field would be 100,000 bbl/day. (Comment: It is
unlikely that this could be completed in only two years given
the contract requirements, which include a 3D seismic
survey.) Other meeting participants included Hassam Jabar,
Director General of the Oil Exploration Company, and heads of
and technical experts from the Directorates of Planning
Studies and Follow Up and Reservoirs and Fields Development.

EPC Contracts Offered to Three Companies
--------------


3. (S//NF) On 17 September, Qutub sent identical letters to
Repsol YPE, Nippon Oil Exploration Limited, and Eni S.p.A.
requesting a feasibility study, 3D seismic survey, and
detailed engineering project proposal for the Nasiriya Field.
The proposal and the study are due by 17 December.
Separately, the MoO has informally suggested to the three
companies that they should jointly develop Nasiriya as a
consortium. Reportedly, the MoO plans to extend similar EPC
contracts directly to other companies for additional fields.
Repsol, Nippon, and Eni are among the 35 pre-qualified
companies that participated in the 13 October meeting in
London to purchase bidding packets and receive instructions
for submitting a long-term PFTSC bid on six oil and two gas
fields (reftel). (Comment: While the MoO apparently will use
the PFTSCs for mainly large developed oil fields, EPC
contracts are expected to be used for small undeveloped
fields like Nasiriya.)

Not So Transparent Negotiations
--------------


4. (S//NF) The Ministry's direct request to Repsol, Nippon,
and Eni conflicts with statements made by Minister
Shahristani in an interview with al-Jazeera on 27 September.
In the interview Shahristani said, "(The MoO is) not directly
negotiating with any companies, rather we announced the first
round of licensing. Companies are entitled to compete and
provide their offers publicly, transparently, and in a clear
way."



5. (S//NF) Comment: Under the terms of this turnkey service
contract the field should be completed and producing within
two years. Then, after the contract ends the field would
revert to the MoO. Oil companies are usually not attracted
to this type of contract. The companies may use this
opportunity primarily to strengthen rapport with the MoO and
increase chances of receiving other contracts in the future.
For example, Eni is currently in talks with the MoO
concerning a new Southern Strategic Pipeline contract and a
partnership with the Iraq Drilling Company. Future business
could potentially be the carrot that brings these companies
to the table. Studies conducted by the MoO and foreign
companies (including Repsol, Nippon, and Eni) on the Nasiriya
field show similar reserve estimates of about 7.6 billion
barrels for the al-Musharraf reservoir, but range from 1.7 -
6.8 billion barrels for the al-Yamamah reservoir.
CROCKER