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IRAQ - Ivanhoe/Inpex Deal.

Vancouver-based Ivanhoe Energy Inc. on April 19 said it had signed an MoU with Japanese oil and gas firm Inpex Corp. to develop Qayara, a field of heavy crude oil only 650 feet deep, south of Mosul (see below). Ivanhoe executives described the deal as a milestone for the firm's patented upgrading technology - a key element of the agreement - and played down security risks of doing business in the war-torn country. Ivanhoe Deputy Chairman Leon Daniel said: "We have looked at the site - it's far from Baghdad and the more serious problems in Iraq", adding that the firm had experience working in risky environments and believed the site was "securable". He said: "It's not like securing Baghdad. This is a work site, it's very remote, the visibility is good there and there is competent security forces and good competent workmen. So we think it's going to be a safe place to work".

Ivanhoe and Inpex are to jointly bid for Qayara. Bidding is to take place after Baghdad ratifies the petroleum law. Ivanhoe Co-Chairman David Martin said: "We'll move very quickly as the government allows us to, to get to the point of negotiating, bidding or whatever is required".

Ivanhoe had been working on Qayara since late 2004, when it signed an agreement with the Oil Ministry to evaluate the field, especially the potential for it to be developed using the firm's upgrading technology. The technology upgrades heavy oil and bitumen by producing lighter, more valuable crude oil, along with energy to be used to generate steam or electricity. The technology was developed in the early 1980s in the forestry sector using wood waste and has been adapted for use in the petroleum sector. Ivanhoe acquired the technology when it bought Ensyn Group in 2006. In a statement, Inpex Chairman Kunihiko Matsuo said Inpex was interested in supporting the development of Ivanhoe's upgrading technology, "which is expected to have the potential to improve the economics of heavy oil production the world over". Ivanhoe will have 55% in the project and will be the operator. Impex will have 45% and was to make a $9m payment within 30 days to Ivanhoe for previous field studies and other work.

INOC Operations: The state-owned Iraq National Oil Co. (INOC), abolished in the 1980s, is being re-established to handle development of Iraq's fields as well as award oil and gas E&P blocks. Its work will be through existing state-owned regional companies, like North Oil Co. (NOC) for the northern fields, South Oil Co. (SOC) for the southern fields, etc.

NIOC will also have JVs with IOCs under service contracts (SCs) and production sharing agreements (PSAs). New JV, SC and PSA models have been drafted under the proposed petroleum law which are to be approved by parliament, hopefully by end-May as Oil Ministry officials predict. But these models, or some of them, may have to be revised before approval.
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Publication:APS Review Downstream Trends
Date:May 7, 2007
Previous Article:IRAQ - Baghdad Efforts.
Next Article:IRAQ - The Main Fields In The North.

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