Exxon says Iraq must ‘create conditions’ to attract foreign investment

Exxon Mobil is in constant dialogue with Baghdad to create the investment climate that would allow it to become a significant player in the Iraqi energy sector, its chief executive, Rex Tillerson, said Monday.

Exxon, the world’s largest publicly traded company, is among the entrants in the race for contracts to work on the biggest Iraqi oil fields.

Iraq, which sits on some of the world’s largest oil reserves, needs billions of dollars of foreign investment to overhaul its oil sector and increase output after years of sanctions and war.

“I hope Iraq creates the conditions that will allow a company like Exxon Mobil to be a participant in a significant way,” Tillerson said during an interview before an energy conference in Qatar.

He said Exxon was discussing with Iraq the conditions that would be necessary for the company “to take risk with our capital and have the opportunity to be successful over the long term.”

Iraq is drawing up the contract terms for a round of bidding on six large fields, which together hold more than a third of Iraqi reserves. Baghdad has sweetened the terms, but international oil firms remain concerned about assuming huge risk for little reward.

Tillerson pointed to Qatar as an investment model that attracts international oil companies. Exxon is the largest foreign investor in the Gulf Arab state and projects scheduled to start there make up the bulk of the oil company’s planned global production growth in 2009.

Exxon has stakes in projects that are set to double Qatar’s production capacity of liquefied natural gas in 2009 to 62 million tons. Qatar is already the world’s largest producer of the gas cooled to liquid form for export.

Despite the huge volume of new production capacity, Qatar as a cheap producer was well placed to adapt to an LNG market suffering as the economic downturn eats into demand, Tillerson said.

“Today the LNG market is relatively balanced, but I think it is going to be soft. It is going to be a bit challenging in the next year or so,” he said. “But Qatar can deliver LNG at a cost of supply below any other LNG source in the world. So their ability to withstand downward pressure on prices is much greater than other sources of LNG.”

In Britain, the South Hook LNG terminal that Exxon and Qatar Petroleum have built together to receive Qatari gas will start up within a few weeks, he said.

In Italy, another port that will receive Qatari gas should take its first load of LNG before the end of June, Tillerson said. The Adriatic LNG terminal was under testing, he said.

Exxon was also developing two projects to increase Qatar’s domestic natural gas supply and remained in talks to build a petrochemical plant in the country, Tillerson said.

(Reuters & the International Herald Tribune)


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