THE WALL STREET JOURNAL: Australia's Woodside Petroleum Signs Iraq Deal: “Last month Shell, a 34% shareholder in Woodside, said that it will help develop Iraq's moribund natural gas sector. Shell and other oil majors are trying to secure Iraqi production contracts. The efforts have been hindered by continued instability in the wake of last year's U.S.-led overthrow of Saddam Hussein.” (ShellNews.net) 16 Nov 04
By STEPHEN BELL
Of DOW JONES NEWSWIRES
November 16, 2004 12:27 a.m.
PERTH -- Australia's Woodside Petroleum Ltd. (WPL.AU) on Tuesday joined the growing list of energy companies trying to develop oil resources in war-ravaged Iraq.
In a two-year cooperation deal with the Iraq Oil Ministry, Woodside said it will evaluate projects in the Kurdistan region of northern Iraq.
The latest diversification move by Woodside, operator of the North West Shelf venture in Western Australia, reveals the company's continued willingness to hunt for oil in higher risk countries, analysts say.
The deal - which at this stage does not involve any Woodside personnel working in Iraq - follows an exploration joint venture last December in Libya and development projects underway in Mauritania.
Woodside and Iraq will initially undertake a joint six-month study to identify opportunities. The company will also sponsor the training, in Perth, of several Iraqi oil officials along with a number of engineering students.
"This is an initial step to work with the Iraqi Oil Minister and Government to more fully understand the potential risks, rewards and benefits of investing in Iraq's oil and gas sector," said Woodside chief executive Don Voelte.
Analysts said the deal gives Woodside a foothold in a country with high potential, should political conditions stabilize over the next few years.
"It is very preliminary but they are obviously looking at opportunities there," said Gordon Ramsay, an energy analyst at UBS.
"Iraq and Iran are seen as number two and three after Saudi Arabia in terms of oil reserves, and you could argue that those places have hardly been explored for a decade," Ramsay told Dow Jones Newswires.
Iraq has reserves estimated at around 115 billion barrels of oil along with 110 trillion cubic feet of gas, according to Woodside. Analysts predict that there could be up to 150 billion barrels yet to be found, it said.
Woodside is looking at the Taq-Taq oil field, which may contain several hundred million barrels of oil. It is also studying the Chemchemal gas field, which was discovered in the early 1950s.
The US$2.5 million deal will initially consist of desktop studies in Perth. Woodside declined to predict when drilling activities might start.
"There is a lot of water to flow under the bridge before we get to that stage," a Woodside spokesman told Dow Jones Newswires.
Last year Iraq called for discussions with energy companies on rebuilding the country's oil sector.
Royal Dutch/Shell Group (RD), Chevron Texaco Corp. (CVX), BP PLC (BP) and Spain's Repsol YPF (REP), are among the oil majors engaged in discussions with Iraq's government.
Last month Shell, a 34% shareholder in Woodside, said that it will help develop Iraq's moribund natural gas sector.
Shell and other oil majors are trying to secure Iraqi production contracts. The efforts have been hindered by continued instability in the wake of last year's U.S.-led overthrow of Saddam Hussein.
Australia assisted the U.S. military action and still has troops on the ground in Iraq.
Woodside declined to comment on whether Australia's military involvement helped paved the way for a petroleum deal.
"We've been in discussions with Iraq since last year and various Iraqi politicians have visited Australia during Government-sponsored tours," the spokesman said.
Voelte worked in the Middle East in previous management roles at Mobil but has not visited Iraq since taking over as Woodside CEO in April, the spokesman said.
Woodside's major overseas project is the US$600 million Chinguetti oil development offshore Mauritania, due to come on stream in early 2006.
In a well flagged move, the government of Mauritania on Tuesday exercised its right to take a 12% stake in Chinguetti.
The terms of the government's participation, including the payment of ongoing costs and reimbursement of past costs, are confidential, Woodside said.
Woodside's stake in the Chinguetti "exploitation perimeter" will be cut to 47.38% from 53.85% currently.
The Mauritanian government will also have a six month option to take up a 12% stake in the US$1 billion-plus Tiof project, if that field is declared commercial.
Woodside said the latest appraisal well on Tiof intersected a gross oil column of approximately 113 meters, a result "in line with pre-drill expectations".
The good news at Tiof follows two dry exploration wells in Woodside's US$100 million-plus oil drilling program offshore Mauritania.
Attention now shifts to the Merou prospect, located on the same trend as Tiof, with a pre-drill target of 250-300 million barrels of oil.
By Stephen Bell, Dow Jones Newswires; 61-8-9245-6408
-Edited by Ian Pemberton