The Business: BP and Shell signal first interest in Iraq oil fields: “Shell claim they have bid in such a way that they wouldn't have to place staff in Iraq until they were satisfied that it was safe to do so.” (ShellNews.net)

By Richard Orange

22 August 2004

 IT'S more than a year since the excited chatter of a post-war Iraq oil bonanza died to an embarrassed silence.

But the way European oil majors have pitched for a research contract that would normally only interest the oil industry's geological services firms, shows the country's 115bn barrels of reserves have lost none of their attraction.

Big players like BP, Royal Dutch/Shell, Eni and Repsol have put in bids for a modest $10m CfS.Sm, €8m) research contract to help appraise two of Iraq's biggest fields.

The contract requires a study of the reservoirs of the Kirkuk and Rumaila fields, and a detailed plan on how to best exploit them. Amazingly, given the potential size of the fields, this is the first time this kind of study has been done in Iraq since the 1980s. Anywhere else but Iraq and the majors' involvement in this kind of work would look ridiculous.

Of the big European firms, the only company that hasn't got involved is France's Total, on the basis that contract research is not one of its business lines, and that anyway, $10m in revenues is far beneath its radar. This would normally apply to the majors that provided four of the 14 bids. The others come from oil services companies.

For the majors, the tender is a way of dipping their toes into Iraq for the first time since the war. It offers them a chance to examine the field data and establish a rapport with the country's oil ministry. Having already spent years negotiating with Saddam Hussein's ministry to develop the Majnoon and Bin Umar fields, Total has a less pressing need to do that.

But the move shouldn't be seen as a sign that European majors now see Iraq as a safe place to work. More significantly, it shows that the handover to an Iraqi administration has brought signing contracts with Iraq more within their legal safety net.

But it's a different matter when it comes to putting staff on the ground. All the majors remain nervous about security. This isn't the first contract Iraq's oil ministry has offered: three engineering contracts, which required significant work on the ground, only attracted a motley crew of little-known oil services and exploration firms, the only ones willing to accept the risks.

This research tender requires some work to be done inside Iraq, although BP and Shell claim they have bid in such a way that they wouldn't have to place staff in Iraq until they were satisfied that it was safe to do so.

Shell has said that it would carry out most of the analysis from its technical offices in The Hague.