Chevron to drill in Iraq starting next year

Chevron said today it will enter Iraq and begin drilling for oil there next year after purchasing major interests in two areas of its Kurdistan region.

The company has no interests in Iraq and had previously not disclosed its pursuit of land in Kurdistan, Chevron spokesman Kurt Glaubitz said.

The Iraqi government has expressed frustration with the autonomous Kurdistan Regional Government for approving oil exploration and production contracts without approval from the national government.

Iraqi officials previously said it would exclude Exxon Mobil from bidding on lands in other areas of the country because of its agreement with Kurdistan to explore in six blocks of land there.

“We believe that this region holds significant promise and that the investment aligns with our strategies to create shareholder value,” Glaubitz said.

Chevron, of San Ramon, California, has not disclosed the cost or estimated potential of its holdings there, which it purchased from a subsidiary of India’s Reliance Group. Chevron agreed to purchase 80 percent stakes in two blocks located north of Erbil and cover an area of 490 square miles. OMV, of Austria, holds a 20 percent stake in the blocks.

“It’s very early days,” Glaubitz said. “We have to complete a drilling program there. We’ll begin drilling our first wells next year. At this point it would be premature to speculate about the resource potential.”

Estimates have varied on the potential for oil drilling in Iraq and its Kuridstan region.

Mark Finley, general manager of global energy markets for BP America, said in March that the country has the potential to produce up to 10 million barrels of oil a day “and potentially challenge Russian and Saudi Arabia for the position of the biggest producer in the world.”

Others have disagreed with that assessment, including Ashti Hawrami, minister of natural resources for Iraq’s Kurdistan Regional Government.

He said in March that the nation’s output could be about 5 million barrels a day of oil, including as many as 2 million barrels a day from Kurdistan by 2019.

Chevron has worked with the Iraqi government since 2003, although not in Iraq, Glaubitz said. The energy giant has coordinated a training program for Iraqi engineers.

In total, Chevron technical staff have trained more than 1,000 Iraqi engineers “to help build their capabilities,” Glaubitz said.