Even Gharraf’s winners appeared concerned despite its location in the relatively calm south.
“It depends on the security situation,” Katsuo Suzuki, Japex’s vice president, said when asked when the companies would begin work. “We are in contact with several security companies to discuss the security situations and analyze carefully the situation to decide our program.”
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“In contact with several security companies?” Interesting news out of Iraq, and it is only logical that the next step in these deals is to evaluate how to properly secure operations there. These companies want to succeed in their oil ventures, and you can bet that they will be seeking the best security companies out there that will insure that success.
That means protecting the fields, the equipment, the employees, and the executives and engineers for these projects. So you can guarantee that security will be partially coming from Iraqi companies and locals, and with a small contingent of security coming from highly skilled expats. That is my guess, and it only stands to reason.
Now one security company that might stand to benefit from this latest deal, is Oryol. It would make sense that Lukoil would use a Russian security company for protective details. I have no clue who Japex would use, and maybe some of the oil security pros out there can help to fill in the blanks. Of course there is the Oil Police down south, but companies will also want their own security that they can control and trust. Either way, good on Iraq for getting this going, and the money earned from these deals will certainly help in the reconstruction of this war torn country. –Matt
Edit: 12/14/2009- I added a newer story on top of the original, in order to add more meat to this post. Check out both of them.
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Oil executives gird for work in risky Iraq
* Global firms arrive in Baghdad for oil auction
* Security still a major concern for oil work in Iraq
By Missy Ryan
BAGHDAD, Dec 14 (Reuters) – They sped into the Oil Ministry in armoured convoys, flanked by muscled guards and men in dark suits, but oil executives marked a milestone this week when they attended an oil auction outside Baghdad’s fortified Green Zone.
It was a measure of a broad improvement in Iraq’s security that executives from 35 global oil firms came for the ministry’s two-day bid round in downtown Baghdad, where the landscape is scarred by six years of suicide bombs and other bloody attacks.
Iraq remains a dangerous place, and bombings killed up to 112 across the capital just days before the auction, but top firms showed themselves willing to confront the risks of working in Iraq to get a crack at its huge, easy-to-pump reserves.
“Their profile is going to be raised, and they are essentially putting their head above the parapet,” said one official in the private security industry, requesting anonymity.
Oil firms, used to working in remote or risky areas, will go to great lengths to try to ensure facilities or employees do not become targets for Iraq’s weakened, but tenacious, insurgency.
In the worst years of violence since 2003, holding such a gathering of foreign diplomats or executives outside the bunker-like Green Zone would have been out of the question.
Even today, many Western officials are largely confined to their fortress-like quarters in the expansive Green Zone, visiting the rest of Baghdad only under heavy security.
But as violence has fallen in the last 18 months, embassies have begun to reopen, U.N. agencies have expanded their work and a few foreign oil firms have quietly set up shop.
“Security is an important element,” said Mounir Bouaziz, a senior executive from Royal Dutch Shell <RDSa.L>.
“I wouldn’t do anything unless I was convinced we had all the measures in place. We have been in Basra since October 2008. We have been doing work and visiting sites, so we learned a lot about security. Security is about behaviour and relationships.”
Shell, like other firms are sure to do, has charted a community relations plan to hire Iraqis for certain jobs, build schools and hospitals and try to create local support.
To help them cope with risk, companies are also hiring private contractors that will provide bodyguards, bomb-sniffing dogs, protection against roadside bombs and much more.
Contractors will also offer advice about how firms can deal with challenges like finding decent medical care or negotiating the formidable political risks that come with working in Iraq.
LOCALISED RISK
The Dec. 8 bombings were the third recent attack taking aim at state facilities and the government’s credibility itself.
They are all the more worrying as U.S. troops prepare to withdraw and a political power struggle before March general elections gives rise to worries about resurgent violence.
Prime Minister Nuri al-Maliki is sure to try to capitalise on the success of the new oil deals, which officials hope will bring Iraqi output to 12 million barrels per day, just on the heels of the top global producer, Saudi Arabia.
That could make the oil industry even more vulnerable to attack. But oil firms like to point out that they are accustomed to risk after years on the ground in remote and dangerous areas like Nigeria’s Niger Delta and Colombia.
Doug Brooks, head of the Association of Stability Operations Industry, said Iraq is on a par with Afghanistan in its complexity for security and logistics firms, but perhaps less challenging than more remote or less developed countries like Somalia.
In Iraq today, violence is a regional story. The south, home to most big oilfields, has been mainly quiet since Maliki steamrolled Shi’ite militias in 2008.
The picture is very different in places like Diyala province northeast of Baghdad, where volatility prompted oil firms to pass on oil and gas fields the Oil Ministry has offered.
State-run Sonangal of Angola, whose tolerance for risk may be higher than some western firms, was the only bidder for two fields in northern Nineveh, al Qaeda’s final stronghold in Iraq.
While oil firms’ employees would probably be ferried to and from worksites by car in Basra, Iraq’s southern oil hub, firms may choose to helicopter staff in and out of more risky sites, said Ian Pilcher, an official at G4S Risk Management.
Story here.
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Iraq hails 2nd oil auction but risky sites shunned
By SINAN SALAHEDDIN
12/12/2009
BAGHDAD — Iraq’s oil minister began counting the money Saturday even before the first wells were drilled, dubbing the country’s second postwar oil auction a triumph even as international oil companies largely snubbed the most violent regions in the Middle East’s last major oil bonanza.
The two days of bidding produced deals on only seven of the 15 fields on offer. Of those, four were in the stable southern Shiite heartland while two in the north went to the only company that expressed interest: Angola’s Sonogal. The last was in central Iraq, in a province where violence has remained low.
The auction was key for Iraq. Its oil bidding in June — the first in over three decades — largely failed, with only one giant field awarded out of eight offered. The hope was for a better showing this time. The deals are critical for boosting Iraq’s oil exports — and bringing in revenue to help rebuild after the 2003 U.S.-led war and decades of neglect and international sanctions under Saddam Hussein.
Iraq has not been able to raise output to even close to pre-2003 levels and is limping along at roughly 2.5 million barrels per day using technology desperately needing an overhaul. That’s well short of Iraq’s goal of joining the ranks of other OPEC heavyweights and reaching 12 million barrels a day in six years.
On Saturday, Russian private oil giant Lukoil teamed up with Norway’s Statoil ASA to snatch the crown jewel of the auction, the 12.88 billion barrel West Qurna Phase 2 field in southern Iraq. It was something of a coup for Lukoil, which won the contract in 1997 under Saddam, only to see the dictator rescind the deal five years later.
The U.S. companies at the auction, including Exxon Mobil Corp., stayed on the sidelines except for one failed bid by Occidental over the two days at the heavily fortified Oil Ministry.
The auction came after bombings Tuesday around Baghdad killed at least 127 people in a sobering reminder of the challenges the Baghdad government faces with the looming withdrawal of U.S. forces.
“It is a big victory for Iraq,” Oil Minister Hussain al-Shahristani told reporters after the final field was auctioned. “It is a big achievement for Iraq to win such contracts at the current prices.”
He estimated the two bidding rounds could eventually bring in $200 billion per year — more than three times Iraq’s current annual budget, which is 90 percent built on oil revenue. Al-Shahristani and Prime Minister Nouri al-Maliki have both staked their political futures on promises of boosting oil output and improving security.
The size of the windfall, however, may be a case of wishful thinking.
Iraq exports between 1.8 million and 2 million barrels a day in any given month, and is not even included in the output restrictions on members of the Organization of the Petroleum Exporting Countries.
None of the U.S. supermajors like Exxon Mobil Corp. or Chevron submitted bids.
“We just decided not to bid,” Richard C. Vierbuchen, president of Exxon Mobil Upstream Ventures (West) Ltd., told The Associated Press. He did not elaborate.
Companies such as Exxon Mobil and Britain’s BP PLC are crucial for their technical know-how, which analysts say trumps that of some Russian or Chinese companies that have made aggressive inroads in Iraq.
The auction offered oil companies their biggest slice of Iraq’s oil yet, roughly one-third of its 115 billion barrels in reserves.
With a lesson learned from the June event, Iraq appeared to be more flexible in its terms. The government offered companies more operational control over the fields while still focusing heavily on the price it was willing to pay them for each barrel produced.
Companies must accept 20-year service contracts and receive a flat fee per barrel produced for their services instead of production-sharing contracts, which are much more lucrative.
Success is vital for Iraq’s leaders.
Political infighting has not only delayed passage of a national oil law, it has also meant that the Baghdad government can’t even agree with the provincial government in the semiautonomous Kurdistan region over who controls oil rights there. Similarly, with elections coming up in March, al-Maliki and al-Shahristani, who is on the same ticket, need some political capital to ward off challenges from other top Shiite political leaders.
Debate on the oil law — which Washington had called a “benchmark” for political progress in Iraq — has been delayed until the new parliament is seated after the election.
The latest auction may, at best, be a step in the right direction — a face-saving event that officials can say saw the two biggest fields snapped up.
The Lukoil-Statoil consortium beat out three other groups led by BP, France’s Total SA and Malaysia’s state-run Petronas, nabbing the field with an offer to accept $1.15 per barrel of oil produced and to raise output to 1.8 million barrels per day in 13 years. That is more than twice the targeted daily output set by Iraq.
“We are very happy today,” said Lukoil representative Andrey Kuzyaev.
Deals were also reached on Gharraf, a small southern field that went to a Petronas-led consortium that included Japex. Russia’s Gazprom claimed a small central Iraqi field. The final field, in the north, went to Sonogal, which earlier in the day made an about-face and accepted Iraq’s terms on another small neighboring field near restive Mosul.
Even Gharraf’s winners appeared concerned despite its location in the relatively calm south.
“It depends on the security situation,” Katsuo Suzuki, Japex’s vice president, said when asked when the companies would begin work. “We are in contact with several security companies to discuss the security situations and analyze carefully the situation to decide our program.”
Three other central Iraqi fields were withdrawn from the bidding and Iraq said it would develop those alone.
A day earlier, a consortium led by Shell and Petronas won the rights to develop Majnoon, a 12.5 billion barrel southern field on which Total had bid. The French supermajor Total had eyed the field hungrily, also on the back of an earlier contract under Saddam that was also canceled.
A second major southern field was awarded Friday. Afterward, however, bidding tapered off and companies showed no interest in five fields offered in volatile eastern Iraq or near Baghdad.
Those fields were also withdrawn, and will have to be developed by Iraq.
Story here.