IRAQ: Energy major signs three-year contract for Risha gas field

UK's BP to produce and export hard to extract gas from site near Iraqi border.

UK energy major BP is to produce and export gas from Jordan's Risha field after striking a deal with the Natural Resources Authority (NRA).

Maher Hijazin, director general of the NRA, tells MEED the authority finalised the terms of its agreement with BP in July. It had previously signed a preliminary agreement with the oil major in January covering the field's 'tight', or hard to extract, gas reserves.

BP has agreed to invest $237m in the field, which is close to Jordan's border with Iraq, over an initial three-year exploration period. It can request a one-year extension to its three-year commitment, according to Hijazin, while Jordan can approve a fifth year if required.

"If BP receives promising results from its drilling, it will move into a development period," says Hijazin. "It is required to submit a development plan within 18 months, which then requires the approval of the government."

Under the initial phase, a new joint venture company will develop the field, with Jordan owning a 51 per cent stake and BP 49 per cent. BP's share of the venture will drop to 40 per cent as gas production increases.

Hijazin says BP will have up to eight years to finalise production and gas sales deals after it completes the exploration phase. Jordan will receive an up-front bonus of $20m at the exploration stage, and a further $30m when BP makes its final investment decision.

The kingdom's state-run National Petroleum Company (NPC) currently manages the field, which is located in a concession 360 kilometres east of Amman near the Iraqi border.

The field produces about 20 million cubic feet a day (cf/d) of gas, but the ministry plans to boost production more than tenfold to at least 250 million cf/d by 2015.

NPC estimates that the field has total reserves of 200 billion cubic feet of gas. "There are varying studies about the gas reserves, but we do know there is huge potential," says Hijazin.

The Risha field was first discovered in 1987. Gas output started in 1989 and peaked in 2003 at 38 million cf/d before falling back to about 20 million cf/d today.

Sarah Haggas, an analyst at UK energy consultant IHS, says production from the Risha field should increase quickly. "We think BP can increase production to 300 million cf/d within a five-to-six-year period," she says.

Lacking conventional hydrocarbons resources, Jordan currently imports almost all of its energy from nearby countries such as Saudi Arabia and Kuwait.

Its oil consumption in 2008 stood at 108,000 barrels a day.

"BP is the right investor and the right company for this field," says Hijazin. "It has the right to export gas from the field and sell it back to the domestic market if it wishes."

BP declined to comment.

The NRA is government run and charged with the exploration and production of mineral resources in the kingdom.

In July, Jordan's parliament approved the NRA's $500m concession agreement with the UK/Dutch Shell Group to exploit the kingdom's oil shale reserves.

The deal could result in Shell producing more than 100,000 barrels a day (b/d) of oil from oil shale in the latter half of the 2020s.

Shell will split the deal into four phases covering exploration, assessment, operations and design. It expects to complete this work in 2023.

The exploration phase will involve drilling on a 22,000-square- kilometre concession, about 25 per cent of the land area of Jordan, in the northeast and south of the country (see Agenda, page 16).

• Author: Perry Williams. Senior Energy Writer
• London