Shell and Total are vying to develop a huge gasfield in what was Iraq's most violent province as a source for exports to Europe.The Iraqi Government held talks with a number of potential companies last week regarding development of the Akkas field in Anbar province, northwest of Baghdad.
Akkas, close to the border with Syria, is thought to contain up to seven trillion cubic feet of gas - up to 6 per cent of Iraq's estimated total of 112 trillion cubic feet. The field is capable of producing up to 50 million cubic feet a day, but this could be raised to 450 million cubic feet per day if developed further.
The Iraqi Government is keen to get the field operational as quickly as possible, using nearby Syria as an export route to Europe to restore revenues. A statement from Shell said that the Iraqi Oil Ministry had asked Shell to undertake "a long-term production test". Total was unavailable for comment, but is also understood to be interested.
In the longer term, both Western oil giants hope to win an equity stake in the project, which would also provide a toehold for further long-term exploration and development in Iraq, which has the world's third-largest oil reserves.
The development of Akkas could mark a turning point in the fortunes of Iraq's oil industry. Anbar is dominated by Sunni tribal groups who were fiercely opposed to the 2003 United States-led invasion. Until recently, it was the scene of some of Iraq's most intense violence, including inter-factional fighting and attacks on US and Iraqi government troops. Since last summer the security situation has improved and that has encouraged the oil giants to look again at the area, which includes the country's western deserts. Akkas is 40km from the Syrian border and is close to existing government-owned facilities in Syria. Shell has been active in Syria for 25 years and operates a joint venture with the Syrian Government and Chinese and Indian partners.
It is not yet clear whether the Iraqi Government will pick a Western oil major, such as Shell or Total, to help to develop the field. It may opt, instead, for a partnership with an oil services company, such as Halliburton or Schlumberger, which would then supply the technical expertise to develop the field and related pipelines to Syria for processing and export.
Last month, Ahmad al-Shammaa, Iraq's Deputy Oil Minister, said that the Government had been hoping to issue a first round of tenders for a number of oilfields early this year.
They are expected to concentrate on the redevelopment of Akkas, as well as other fields such as Rumeila South, Rumeila North, Subba/Luhais, Zubair and Missan in southern Iraq, and Kirkuk in northern Iraq.
Before the effort to depose Saddam Hussein, Iraq signed a preliminary agreement with Syria to supply it with 50 million cubic feet of gas a day from the Akkas gasfield. The Syrians are eager to revive this agreement.
The development of the Akkas field could yet be bogged down by political concerns. The Iraqi Government has not yet passed a long-awaited hydrocarbon law that would determine how oil and gas revenues are distributed.
Slow progress has been made so far because of a dispute with the Kurdish autonomous region over its right to develop Northern Iraqi oilfields without supplying proceeds to the central government in Baghdad.
© 2007 Times Online