A subsidiary of Oil and Natural Gas Corporation (ONGC), the state-owned Indian energy company, has announced that it is likely to invest US$1.45 billion in an Iraqi oil block that it was awarded during the Saddam Hussein regime.
The Press Trust of India reported that the block, near Iraq’s border with Saudi Arabia, was awarded to ONGC Videsh (OVL), the overseas investment arm of ONGC, by Hussein’s government in November 2000. However, the government formed after the US-led invasion of Iraq in 2003 has since renegotiated the contract.
“The service exploration and production contract for Block-8 have been concluded and the agreement is likely to be signed in the next couple of months,” an unnamed official from OVL is quoted as saying.    Â
The field is believed to hold around 54 million barrels of recoverable oil from reserves estimated at 645 million barrels. The first two phases of the project require an initial investment of $86 million with a further $1.45 billion on developing the field in the future.
The slicing up of Iraq’s huge oil reserves has caused a stir in the international oil and gas community due to the unorthodox contracts being sent out for tender. Instead of the preferred usual contract that offers interested parties a share in profits plus the ability to book reserves the Iraq contracts offer remuneration in kind for each produced barrel as well as cost fees.Â
The Iraqi Oil Ministry recently raised the percentage outside oil companies would have in any joint ventures it agrees with local Iraqi operators to 75% from 49%. To cover this and the recent drop in oil prices Iraq has also increased the signing on fees for any successful bidders by over $2.5 billion.
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