UPDATE 2-Iraq to sign deals with BP, Eni

By Ahmed Rasheed BAGHDAD, Oct 29 (Reuters) - Iraq's Oil Ministry said on Thursday it will sign a final deal on Nov. 3 with BP and China's CNPC to develop its biggest oilfield, Rumaila, the nation's first major oil pact since the U.S. invasion in 2003. The ministry will also sign an initial deal on Nov. 2 with Eni Spa over the Zubair oilfield, Oil Ministry spokesman Asim Jihad said, after offering improved terms to bring the Italian oil major back to the table. The agreement with Eni and its partners, Occidental Petroleum Corp and South Korea's KOGAS, must be approved by Iraq's cabinet before a final contract can be signed, Jihad said. Both deals involve supergiant oilfields and a promise of increased production that could catapult Iraq up to the top ranks of the league of oil producing nations. Iraq's oil infrastructure is dilapidated after years of war, sanctions and underinvestment, and while it has the world's third largest reserves, it is only the 11th largest producer. The country hopes foreign investment will help it move up to third place with oil output of around 7 million barrels per day (bpd) -- triple current production of around 2.5 million bpd -- within six or seven years. Rumaila, with estimated reserves of 17 billion barrels, is the workhorse of Iraq's oil sector, producing almost half of the country's total daily output. The deal with BP and CNPC was the only one that emerged from Iraq's first post-invasion auction of oil contracts in June after international firms balked at Iraq's stiff terms. TAX TERMS Subsequent negotiations behind closed doors have, however, led to other deals being worked out on some of the fields that were not successfully auctioned off. One of those is the agreement with Eni and its partners over Zubair. Eni initially refused to develop the field for the $2/barrel fee Iraq offered but changed its position after Iraq offered to cut taxes, Claudio Descalzi, Chief Operating Officer for Eni's exploration and production unit said. "The tax terms are different now. Before, taxes were on total revenue (cost oil and profit oil). Now taxes are just on profit oil," he told a conference call with analysts on Thursday. "We can say that the $2 of today can be compared more or less to $4-5 of yesterday in terms of profits per barrel," he added. Eni has said it expects to invest $10 billion in Zubair, which has estimated reserves of 4 billion barrels, and will boost production to 1.125 million bpd from 200,000 bpd within seven years. Iraq will hold a second round of oilfield tenders on Dec. 11-12 in which largely undeveloped fields will be on offer. Royal Dutch Shell Plc's Chief Financial Officer told a conference call with reporters on Thursday the Anglo Dutch Oil major could participate in the second round auction and was watching with interest in the hope the improved fiscal terms will also be applied to the contracts offered. (Additional reporting by in Stephen Jewkes in Milan and Tom Bergin in London; writing by Michael Christie; editing by David Brough and James Jukwey) Keywords: OIL/IRAQ DEALS ([e-mail]; [phone]; Reuters Messaging: [e-mail]) COPYRIGHT Copyright Thomson Reuters 2009. All rights reserved.

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