OilVoice - Japanese JV In Lucrative Iraqi Field Falls Through

Japanese JV In Lucrative Iraqi Field Falls Through

Wednesday, March 03, 2010

Iraq is set to develop the Nassiriya oil field by itself after unsuccessful attempts to broker a deal with a Japanese consortium. The failure of the Nippon Oil-led joint venture to clinch the deal after a series of similar near misses serves as a major hit to Japan's chances of gaining access to lucrative Iraqi oil reserves.

After months of talks, negotiations with Nippon Oil and its two partners Inpex and JGC have reached an unsatisfactory conclusion for all parties involves. The news will no doubt come as a major disappointment to Japanese energy and engineering firms, since as recently as January of this year the Iraqi oil ministry announced its readiness to embark on a new round of talks to break the stalemate.

The Japanese consortium's alleged intransigence over financing issues, has proven to be a major stopping point in talks, and has led Baghdad to abandon efforts to salvage any sort of deal. A deep sense of mutual misunderstanding between the two nations has been a major part of negotiations.

In the light of the Nassiriya fiasco, Japanese companies risk being left behind as the more assertive majors and overseas oil firms solidify their position in Iraq. Japan's failure to make the most of the opening up of the Iraqi oil industry is especially disappointing for the nation given the progress made by its Asian rivals.

Although not exempt from their own setbacks, Chinese and South Korean firms have secured large upstream concessions in both in the semi-autonomous Kurdish region and elsewhere in Iraq.

Most notably China National Petroleum Corporation (CNPC) has launched a drilling tender for the Rumaila field, which can be found on the border with Kuwait. CNPC presently operates the field in partnership with British-based industry major BP. Meanwhile, Korea National Oil Corporation (KNOC) has been busy at work at the Qush Tappa and Sangaw South fields in Kurdistan. Likewise, Sinopec and Korea Gas are also becoming increasingly active in the country.

The Nassiriya contract was tendered as part of a scheme to develop selected oil fields outside the country's licensing rounds. Nassiriya is estimated by the Iraqi oil ministry to hold 4.4 billion barrels of oil and, according to officials, could produce 100,000 barrels per day (bpd) within 18 months of drilling, with volumes reaching 1 million bpd at peak production.