Company News

UPDATE 2-Iraq to develop Nassiriya after Nippon talks end

* Iraq plans to up Nassiriya output to 50,000 bpd end-2010

* Iraq sets production levels for Zubair, W. Qurna Phase One

(Adds details on other oilfields, background)

BASRA, Iraq, Feb 28 (Reuters) - Iraq plans to develop the Nassiriya oilfield on its own after months of talks with a Japanese group led by Nippon Oil Corp 5001.T reached a dead end, the head of Iraq's South Oil Co. said on Sunday.

Nippon and its partners, oil explorer Inpex Corp 1605.T and engineering firm JGC Corp 1963.T, had been negotiating the deal since the first half of last year, but a final deal was held up by issues over financing.

“Talks with the Nippon group have reached a dead end, and we will start developing the field through national efforts,” Dhiya Jaafar, head of the SOC told Reuters in an interview in the southern oil hub of Basra. Jaafar did not give more details.

The largely undeveloped Nassiriya field is listed as having reserves of under 5 billion barrels. Nippon Oil Corp had projected it could pump up to 200,000 bpd within two years, according to Iraqi officials.

Iraq plans to drill 10 new oil wells in Nassiriya this year, Jaafar said. “We are capable of boosting production from Nassiriya from 10,000 bpd to 50,000 bpd by the end of 2010,” he said.


Iraq’s Oil Ministry has also agreed with foreign oil firms to set baseline production levels for West Qurna Phase One and Zubair oilfields, Jaafar said.

Exxon Mobil XOM.N and Royal Dutch Shell RDSa.L agreed to a baseline production level at the 8.7-billion-barrel West Qurna Phase One oilfield of 244,000 bpd.

The contract to develop the supergiant oilfield became effective on Feb. 12, he said, without saying when Exxon and Shell planned to pay the $400 million signature bonus due to be paid to Iraq within 30 days of that date.

Italy's Eni-led ENI.MI group agreed to set the baseline production level at Iraq's 4-billion-barrel Zubair oilfield at 183,000 bpd. Eni and its partners, U.S.-based Occidental Petroleum Corp OXY.N and South Korea's KOGAS 036460.KS, set an eventual output target for the field of 1.2 million bpd.

The baseline production will be used a benchmark against which firms’ ability to boost output will be measured -- and their fees will be determined.

The contract to develop the supergiant West Qurna Phase Two oilfield, signed by Lukoil LKOH.MM and Statoil STL.OL became effective on Feb. 18, while the one for Majnoon oil field won by a Shell-led group will be effective on March 1st, Jaafar said. Iraq has struck a series of deals with foreign oil companies to develop its vast oilfields in a bid to boost production capacity to 12 million bpd, from around 2.5 million bpd now. (Additional reporting by Ahmed Rasheed; Writing by Rania El Gamal, Editing by Louise Heavens)