Iraq Is Soliciting Bids to Help Determine How Much Oil It Has

LONDON, Aug. 3 - Iraq has an immense amount of oil, but no one knows in detail just how much is there, not even the country's oil ministry.

So the ministry is undertaking the first comprehensive evaluation in decades of the two biggest fields now in production, at Rumaila in the south and Kirkuk in the north. And it has invited dozens of foreign energy companies to compete for the job of sizing them up.

At least 16 companies, some of them giant oil producers and others independent engineering contractors, are preparing bids, according to executives at two of the companies. Bids are due on Aug. 15, they said, and the contracts are expected to be awarded in October.

The projects will be the first application of up-to-date oil exploration technology to Iraq's resources since before the Iran-Iraq war of the 1980's. "These are our oldest fields," said Falah K. Khawaja, the oil ministry's director general for management, human relations and government, speaking of the Kirkuk area, where production began in the 1920's. "It is high time that they are investigated."

Though the contracts will be relatively small, worth perhaps $10 million each, their effect could be great, both for Iraq and for world energy markets, officials and outside experts said. Determining how much oil is in the ground and how it can best be recovered are essential first steps in rebuilding and modernizing the Iraqi oil industry, they said.

More reliable data on Iraq's oil could also help calm turbulent commodity markets, where futures prices have soared to new records, in part on fears of supply shortages and disruptions from terrorism.

Events on Tuesday illustrated how skittish the markets have become. When Purnomo Yusgiantoro, president of the Organization of the Petroleum Exporting Countries, said the group's members had no spare capacity and could not quickly increase output, the price of a barrel of low-sulfur oil for delivery next month soared above $44 in London trading, easing when Saudi officials issued a more optimistic statement. Later, oil settled on the New York Mercantile Exchange at $44.15, up 33 cents.

BP and Royal Dutch/Shell are among the major producers that are considering bidding on the contracts, according to spokesmen for each company. Despite France's long history of involvement in Iraqi oil fields, the French company Total will not be bidding, a spokeswoman said; neither will Statoil of Norway.

Wayne Kelley, managing director of the RSK Group, an independent oil engineering firm, is preparing a bid in partnership with Ryder Scott Petroleum Consultants of Houston. Tigris Petroleum, an Australian consulting firm with experience in Iraq, also plans to bid.

It is not clear if Halliburton, the construction and oil field services company formerly run by Vice President Dick Cheney, which the Bush administration hired to repair pipelines and other oil facilities in Iraq after the invasion, was invited by the oil ministry to submit a bid.

A spokeswoman for the company, Cathy Gist, said in an e-mail response to questions that Halliburton "would comply with a bid request if we determined the opportunity was a good business decision." She did not indicate if Halliburton had in fact been invited.

Mr. Khawaja of the oil ministry also declined to say whether Halliburton had been invited to bid. "All I can say is the performance was way below our expectations" on Halliburton's repair contract, he said.

A spokeswoman for Schlumberger, Halliburton's chief rival in oil field services, declined to say if it had been invited to bid or planned to take part.

Another company regarded as a plausible bidder is Lukoil of Russia, which has been working closely with Iraq's oil ministry in recent months, and is training 100 Iraqi technicians in western Siberia. Lukoil has said it still hopes that the Iraqi government will honor a 1997 contract it won to develop the country's West Qurna-2 field, though Iraqi officials say that deal is void. Lukoil did not return a call seeking comment.

A spokeswoman for Exxon Mobil refused to comment on the bidding; a spokesman for ChevronTexaco had no immediate comment.

Iraq's potential oil yield is a matter of argument. Its existing fields are estimated to contain reserves of 115 billion barrels of oil, just less than half those of the world's largest producer, Saudi Arabia. But three wars since 1980 and more than a decade of sanctions and isolation have left Iraq with old, dilapidated infrastructure and imperfect knowledge of the condition of its oil fields.

Analysts say Iraq's problems have been compounded by poor management of the fields, including discredited Soviet-era practices like injecting water and crude oil into wells to bring new oil to the surface.

Iraq's fields "have not been produced optimally since the first gulf war," said Peter Nicol, director of oil and gas research for ABN Amro in London.

Since the American invasion last year, sabotage has further limited production. Though the oil ministry set a goal of three million barrels a day by the end of 2004, a common view in the oil industry here is that Iraq is producing about two million barrels. And analysts differ on how much better it can do.

"There is considerable debate around the official numbers" attached to Iraq's oil reserves and its potential output, Mr. Nicol said, adding that the markets want to know "how much is based on hard fact and how much is based on extrapolation - on rules of thumb."

Iraqi officials say the results of the planned assessments will help determine how their oil resources are developed. "The idea is to build a geological model that can be used as an input for simulations," said Hazim A. Sultan, the oil ministry's director general for reservoirs and fields. Mr. Sultan disputed the notion that the Kirkuk field had suffered abnormal deterioration.

Performing technical studies is sometimes a way for oil companies to gain an inside track for development and production ventures. But executives taking part in the bidding said that in this case, the assessment contracts were not a prelude to foreign investment.

"This is going to allow the Iraqis to manage their own assets," said Norman Davidson Kelly, president of Tigris Petroleum. The project, which officials expect to take several months, is "the start of a redevelopment process for these fields" by the Iraqis themselves, Mr. Kelly said.

While foreign companies may be asked to help with continuing operations, the oil ministry will retain ownership of all production from the Rumaila and Kirkuk fields, said Wayne Kelley of the RSK Group.

Potential participants and Iraqi officials said that most or all of the engineering work in the oil field assessments could be performed outside the country and away from security hazards. Mr. Sultan said the ministry would provide the successful bidder with most of the old data it will need on pumping and injection, physical properties of the recovered oil and other aspects of the fields.

Ronnie Chappell, a spokesman for BP, said that if his company won the contracts, "there would be no need for any of our staff to be in-country until security improves."

Heather Timmons reported from London for this article and James Glanz from Baghdad.

I can do this for $100,000.

Would "a lot" be acceptable? How about, "when all your wells go dry, you've taken it all out."

Owl_Eagle

”Guns Before Butter.”

How about, "when all your wells go dry, you've taken it all out."

You might want to soften that up...maybe tell them they need to start building casinos and theme parks in 5-10 years.

I can do this for $100,000. Would "a lot" be acceptable? How about, "when all your wells go dry, you've taken it all out."

You right-wingers think you're so funny with your eco-terrorist quips! How you so thoughtlessly throw out the phrase "a lot" of oil shows that you haven't even thought of the suffering of the dinosaurs who lost their lives so that you may drive some SUV terror-mobile, or even a Hummer.

And that quip "when all your wells go dry, you've taken it all out." How crude! That's probably you're idea of a joke, isn't it? Its probably also your policy for determining when to quit drilling in ANWR! Don't you care how many Aleutian-Americans are displaced, how many caribou are now homeless and starving, and how many penguins have been displaced due to the Cheney/Halliburton/big oil cartel's rape of that once-pristine land?

Would "a lot" be acceptable?

This article misses a big concern for OPEC, especially Saudi.

Many know that Saudi, etc. support for the sanctions regime over Iraq was due to their desire to suppress Iraqi oil production, which consequently increases the value of their own oil. Hence the "containment" talking points and PR that proliferated before the war - a Saudi-paid anti-war propaganda campaign.

But there's more. If Iraq rejoins OPEC, and if Iraq were established to have significantly larger reserves that previously explored this will upset the OPEC guidelines for apportioning production shares. Shares are much calibrated to reserve size. If followed Saudi would have to give up significant production share.

Despite France's long history of involvement in Iraqi oil fields, the French company Total will not be bidding,

Need to check my glasses.

Interesting, no?

The cue snaps, the cue ball rolls across the table and shortly we will see the other balls careening off the rails. Re-defining Iraq's reserves has significant implications for OPEC, as you point out. This is a shot across the bow.

I have been saying since 2001 that the road to Riyadh goes through Baghdad. I didn't fully visualize exactly how it would all play out, but I still believe it and I think we are seeing a new equilibrium emerge. The arab center of gravity is shifting.

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