Occidental heading east  

Posted by Big Gav in

The WSJ has a report on at least one US oil company looking to cash in on Iraq's oil - Occidental Petroleum - Oxy, At Least, Wants in on Iraq

As Iraq prepares to auction off oil contracts next week, the biggest of the Big Oil companies are keeping mum on whether they plan to bid. Exxon Mobil Corp. CEO Rex Tillerson said earlier this month his company was “still evaluating” whether to participate. Representatives for Chevron Corp. and ConocoPhillips said much the same in interviews this week.

But at least one oil chief is happy to say he wants to get into Iraq: Ray Irani, chairman and CEO of California-based Occidental Petroleum Corp. “Iraq is a huge resource play,” Mr. Irani said in an interview. “The place is full of opportunities.”

Other companies have complained privately that Iraq is offering only so-called “technical service contracts” rather than the production-sharing deals companies prefer. That means, in essence, that the companies would be serving as contractors, getting a fee for their work but not owning any of the oil they produce or the reserves left in the ground.

Mr. Irani said the structure of the contracts doesn’t bother him. After all, he noted, owning reserves is no guarantee—look at Venezuela, where companies owned reserves until the government nationalized the oilfields two years ago.

“As long as the returns on investment are attractive and merit the risk that’s involved, we don’t have a problem,” he said. “I’m not hung up on whether you can book reserves or not.”

Not that Mr. Irani doesn’t see risks. The security situation in Iraq remains uncertain, he said, especially as U.S. armed forces pull back. The political situation is just as unstable. As a result, Mr. Irani said Occidental would prefer to get involved as part of a consortium rather than going it alone.

Occidental is far smaller than Exxon and its ilk, and it specializes in the kind of projects Iraq is offering—rejuvenating old, neglected fields and developing previously discovered resources—rather than the exploration the supermajors do best.

But most experts expect that, despite its complaining, Big Oil will fall in line and participate in next week’s auction. After all, at 115 billion barrels of proved reserves and plenty of territory left unexplored, Iraq is too big to ignore.

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