South Korea Signs $3.55 Billion Iraq Oil Field Accord

By Heejin Koo and Shinhye Kang

Feb. 24 (Bloomberg) -- South Korea signed a non-binding agreement valued at $3.55 billion to develop an oil field in southern Iraq as it seeks a foothold in the country with the world’s third-largest crude oil reserves.

South Korean President Lee Myung Bak and his Iraqi counterpart Jalal Talabani signed the deal to develop the oil field in Basra, where most of Iraq’s crude reserves are located, Lee’s office said in a statement after the two leaders met in Seoul today.

South Korea imports almost all its energy needs and is stepping up efforts alongside China and Japan to garner stakes in overseas oil fields to secure supplies. Iraq needs money to rebuild the nation and its oil infrastructure following years of war and economic sanctions.

“South Korea may secure 2 billion barrels of oil from the fields,” presidential spokesman Lee Dong Kwan said today. The country imports about 800 million barrels of oil a year. Both sides will make a final contract by June, Lee said.

In return, South Korea will help build infrastructure including power plants, the Ministry of Knowledge Economy said in a separate statement.

South Korea deployed as many as 3,600 non-combat troops to the northern Iraqi town of Irbil from 2004 to 2008 to help rebuild the region and provide medical assistance.

Korea National Oil

Lee asked Talabani to assist South Korean companies with bids to develop oil and gas fields in central and southern Iraqi, build an oil refinery project in Baghdad and to purchase a power generator, according to the statement. The Iraqi government welcomes South Korean companies’ bids and will review them, Talabani said, according to Lee’s office.

Iraq is running two bidding rounds to attract investors to help develop its oil and gas fields. The country last year pre- qualified 35 international companies to take part in the first sale and subsequently added six more state-run oil groups. Korea Gas Corp. was among the pre-qualifiers in the first round.

South Korea also asked Iraq to support Korea National Oil Corp.’s projects in oil fields in northern Kurdish areas.

Last year, Korea National Oil signed production-sharing contracts for the Qush Tappa and Sangaw South blocks with the Kurdish regional government and agreed to buy stakes in six other oil fields. Iraq’s Oil Minister Hussain al-Shahristani has warned that Kurdish contracts will be reviewed when a federal energy law is passed.

Resolve Differences

“The meeting today will attempt to resolve differences after Korea National Oil’s contracts with the Kurdistan regional government,” said the Ministry of Knowledge Economy.

Oil agreements signed between the largely autonomous Kurdistan region and international oil companies have been a sore point between the Shi’ite Arab-led government and Kurdish leaders.

The statement from Lee’s office also said South Korea’s Incheon International Airport signed a $31 million operational management contract with Irbil International airport, located in the Kurdish town of Irbil. The Iraqi president is on a four-day visit to South Korea.

To contact the reporter on this story: Heejin Koo in Seoul at hjkoo@bloomberg.netShinhye Kang in Seoul at skang24@bloomberg.net.