Newsletter No. 1392
News-Analysis
June 27, 2009

 

NIPPON OIL LOOKS SET TO WIN MASSIVE NASIRIYA OIL FIELD

Several media sources are hinting that Japanese companies led by the Nippon Oil Corporation are about to secure the development rights to the massive Nasiriya oil field in southern Iraq. The Yomiuri Shinbun is the most assertive, making the deal sound like a near-certainty. Indeed, this would help explain why Iraqi Foreign Minister Hoshyar Zebari just spent a full six days in Tokyo—no doubt he would have been angling for a comprehensive package of support for the Iraqi government.

We have been following this story for several years. We reported Japanese interest in the Nasiriya field going back to Shingetsu Newsletter No. 431 in November 2006. The Nippon Oil bid has been noted in Shingetsu Newsletter Nos. 1261 and 1304. As we noted in the latter newsletters, the consortium led by Nippon Oil has been competing against bids led by Italy’s Eni SpA and Spain’s Repsol.

According to the Yomiuri, the Japanese companies are now looking to reach an agreement with the Iraqi authorities by July at the earliest.

The Nippon Oil Company, Japan’s largest oil distributor, expects the Nasiriya field’s oil production to reach 600,000 barrels per day within two years of obtaining development rights. This would be equivalent to more than 10% of the crude oil consumed in Japan. If the bid is accepted, this would be the largest oil field ever developed independently by a Japanese company. (The distinction is currently held by the Khafji oil field on the Saudi-Kuwaiti border, which Taro Yamashita’s Arabian Oil Company developed from 1957 to 2000, and which produced 300,000 barrels of oil per day at the height of its operations—the Nasiriya field may double that record.)

The consortium led by Nippon Oil now includes stakes held by the Inpex Corporation and JGC Corporation. This tie-up appears to have quietly occurred in March or perhaps the beginning of April. According to the Yomiuri, these companies plan to produce 150,000 barrels per day during the first two years of operations, and then increase output to the maximum of 600,000 barrels a day. They will also construct an oil refinery and a power plant. The total project costs are expected to reach about US$10.5 billion. The government will support the project through the JBIC.

Bids Resubmitted

Before the latest round of stories, we had heard in mid-April that Iraq had asked Nippon Oil, Eni, and Repsol to resubmit their bids for developing the Nasiriya field. We reported in Shingetsu Newsletter No. 1304 that Iraq was to begin awarding contracts in March, but clearly the Iraqi side was not entirely satisfied. Oil Minister Husain al-Shahristani told reporters in April, “Eni, Repsol, and Nippon Oil have recently submitted their technical offers to the Oil Ministry. After studying these offers, we had some remarks and we asked them to review their offers and submit new ones… We are expecting them to come back with new offers in a matter of days.”