Page last updated at 11:28 GMT, Saturday, 12 December 2009

Iraq oil capacity 'to reach 12m barrels per day'

Worker operates valves at Rumaila oil field, near Basra, southern Iraq
Iraq has the world's third largest oil reserves, after Saudi Arabia and Iran

Iraq's oil capacity could reach 12 million barrels per day (bpd) in six years, the country's oil minister says.

Hussein al-Shahristani told reporters in Baghdad that oil producers would not necessarily operate at full capacity, but would take into account demand.

Saudi Arabia, the world's largest oil exporter, has a capacity of 12.5m bpd.

Earlier, a joint bid by Russian and Norwegian oil firms won the contract for the "supergiant" West Qurna field, said to have reserves of 13bn barrels.

Lukoil and Statoil will get $1.15 a barrel and will work to raise output from West Qurna Phase 2, in the Basra region, to 1.8m bpd. In June, a winning bid to develop another Iraqi field received $2 a barrel.

The terrorists tried to send a message to the companies through the bombings... But [it] was not delivered and never deceived them
Hussein al-Shahristani

On Friday, the contract to develop the 12.6bn-barrel Majnoon field in southern Iraq was won by a consortium led by Shell. It also pledged to increase daily production to 1.8m barrels, up from only 46,000.

Rights for the eastern Halfaya field, with 4.1bn barrels of reserves, went to a consortium led by the Chinese state oil company, CNPC.

But the East Baghdad field, part of which lies under the city's Sadr City area, and another in the Diyala province attracted no bids.

'Big achievement'

At a news conference on Saturday, Mr Shahristani called the result of Iraq's second international oil auction since 2003 a "major success".

"It is a big achievement for Iraq to win such contracts at the current prices," he said.

The minister said the contracts awarded over the past two days, coupled with those from the last auction in June and government efforts, would allow Iraq to boost daily production from 2.5m barrels to 12m.

The projected plateau production from the winning bids of the second round alone was 4.765m bpd, he said.

Map: oilfields in southern Iraq

If a daily total of 12m barrels was achieved, Iraq would overtake Russia and challenge Saudi Arabia for the position of the world's largest oil producer. However, Riyadh says it could produce 15 bpd.

Iraq's proven reserves now stand at 115bn barrels, below Iran's 137bn and Saudi Arabia's 264bn. But Iraq's data dates from the 1970s, before improvements in technology transformed the industry.

Mr Shahristani declared that Iraq had "scores" of oilfields, including "supergiants" - fields of 5bn barrels or more - to offer international companies in the future.

On Friday, he insisted that bidders had not been deterred by security concerns, pointing out that they had agreed to help develop Iraq's biggest oil fields at remuneration levels lower than they hoped for.

A series of bombings in Baghdad on Tuesday left 127 people dead.

"The terrorists tried to send a message to the companies through the bombings... that Iraq is unstable and investment will be overshadowed by risks," he told state television.

"But this message was not delivered and never deceived them. They came and submitted competitive offers that surprised the global oil industry," he added.

Nevertheless, correspondents say the failure to attract bids for more than half of the oilfields suggests Iraq's abundance of easily extractable oil was not enough to overcome many firms' concerns about security, as well as Iraq's political and legal system.

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