Iraq initials contract for Kuwait-led oil exploration

Iraq initialled an oil block exploration and development contract with a consortium led by Kuwait Energy on Monday as part of its drive to attract more foreign investment following years of war and sanctions.

The contract gives the consortium rights to oil block 9, which is located in Iraq’s southern Basra province. The agreement was reported by Reuters last month.

Kuwait Energy said in a statement it would be the operator of the block with a 40 percent working interest, while Turkish national oil company TPAO and Dragon Oil PLC will each hold a 30 percent.

The consortium has a five-year exploration phase to determine the oil prospects of the block which spans over a 900 sq km area, Kuwait Energy said.

If exploration is successful, the group can apply to the Iraqi government to continue development over a 20-year period, it added.

OPEC member Iraq is expected to be the world’s biggest source of new oil supplies over the next few years. It plans to open up more rounds for oil and gas blocks for auction.

A handful of international companies won bids in May at Iraq’s fourth energy auction, which had a poor showing because of tough contract terms drawn up by Baghdad.

Iraq has offered foreign companies less attractive service agreements – where they are paid a fee – rather than production-sharing deals that allow them to profit jointly from the output.