Official: Iraq to award oil contract in March

Iraq's Oil Ministry will award a service contract to develop a prized oil field in southern Iraq next month, a senior Iraqi official said Wednesday.

Italy's Eni SpA, Spain's Repsol and Japan's Nippon Oil are competing for the service contract to develop the Nasiriyah oil field. The contract is designed to offer engineering, procurement and construction services.

Iraq's deputy oil minister, Ahmed al-Shamaa, said the Iraqis will finish studying the three companies' technical offers at the end of February and their commercial offers in the first half of next month.

"The contract will be awarded end of March," al-Shamaa said.

The field is one of Iraq's discovered but undeveloped fields and lies in the oil-rich Dhi Qar province, about 200 miles (320 kilometers) southeast of Baghdad.

According to ministry estimates, the oil field has reserves of about 4.4 billion barrels with a potential of producing at least 300,000 barrels a day.

Al-Shamaa also divulged the ministry's plans to develop part of another prized oil field in central Iraq _ the East Baghdad field that lies mainly in the provinces of Baghdad, Salahuddin, and extends southward within the province of Wasit.

The geologically and technically challenging field is classified as a super giant field, meaning it has at least 5 billion barrels, but it produces less than 10,000 barrels a day. Its production before the 2003 U.S. invasion was 50,000 barrels per day.

Al-Shamaa said the ministry is assembling plans to develop the field and will invite companies that were previously involved in studies on it to begin a bidding process next month.

"It is a huge field with a huge amount of oil, but it's scattered and many wells will need to be drilled," he said.

Iraq, which sits on the world's third-largest oil reserves of at least 115 billion barrels, has offered 19 oil and gas fields to international companies for development in two major bidding rounds. The war-ravaged country is trying to boost revenues amid falling oil prices.

Iraq plans to add 4 million to 4.5 million barrels a day to its current 2.4 million barrels per day capacity over the next four to six years as it tries to rebuild its infrastructure and develop its economy.

The ministry plans to sign the contracts of the first round in mid-2009 and the second round by the end of the year. Nasiriyah oil field is not among the two sets of fields on offer, while the southern part of East Baghdad field is in the second bidding round.

A drop in oil prices to under $40 per barrel from a summertime high of about $150 has hit Iraq hard _ the country depends on oil revenues for nearly 95 percent of its budget.

As a result, the government was forced to slash its 2009 budget from $79 billion to $68.6 billion and most recently to $53.7 billion. It is considering further reductions.

On Wednesday, benchmark light, sweet crude for March delivery rose 9 cents to $35.02 a barrel by noon on the New York Mercantile Exchange.