FINANCIAL TIMES: Shell and BP win contracts in Iraq: “Shell, the Anglo-Dutch energy group, has been invited to take part in a project to work out how more oil can be extracted from the Kirkuk field in northern Iraq, which has been in operation since 1927.” (ShellNews.net) 15 Jan 05

By James Boxell

Published: January 15 2005

BP and Royal Dutch/Shell have both been asked by Iraq's oil ministry to help conduct technical studies of two of the country's biggest oil fields.

Shell, the Anglo-Dutch energy group, has been invited to take part in a project to work out how more oil can be extracted from the Kirkuk field in northern Iraq, which has been in operation since 1927.

BP has been chosen for a similar study on the Rumaila field in the south of the country.

Both companies will be providing the ministry with advice, analysis and training. The projects offer no guarantee of future access to Iraq's vast oil and gas reserves.

However, the world's biggest oil companies are desperate to position themselves to take advantage of any opening to foreign involvement in the country following the overthrow of Saddam Hussein.

Many of the biggest oil-producing countries are unwilling to give international oil companies access to their oil fields.

JJ Traynor, oil analyst at Deutsche Bank, said BP and Shell's Iraq plans were a "long-term play with some big political questions still to be answered. This year you are going to get an election in Iraq and then a government that forms some sort of minerals policy. Then they need to decide whether to let the foreign oil companies in. There is no legitimacy at the moment."

Elections are expected to start in Iraq at the end of this month.

Gavin Graham, Shell's director of business development in the Middle East, said: "Shell's contribution to the [Kirkuk] study . . . is in line with our continued commitment to supporting the Iraqi oil industry and establishing a material and enduring presence in the country."

BP said it was "delighted" to be involved in the Rumaila study, which would allow it to "assist Iraq in the restoration and development of its reservoirs and in stabilising its oil production".

Both studies will be conducted outside Iraq. BP will work in conjunction with Southern Oil Company, the state-controlled group that looks after Iraq's southern oil assets, while Shell will assist Exploration Consultants, a private UK-based company.

Iraq is estimated to hold at least 100bn barrels of known oil reserves, while Saddam Hussein's oil ministry claimed another 100bn barrels were yet to be discovered. Deutsche Bank has estimated its oil reserves could last 100 years at previous Opec production rates.

The country's oil fields suffered from chronic underinvestment during the Saddam years, which means it should be relatively easy to increase production.