FT reported that Dragon Oil has emerged as a partner in a winning consortium seeking to develop new oil and gas fields in southern Iraq although low levels of interest from companies marked the auction of 12 blocks last week.
The Dublin registered FTSE 250 energy group, which is controlled by Dubai's state owned Emirates National Oil Company is to hold 30% stake in a block in the Basra province near the border with Iran.
Kuwait Energy will operate the block with 40% interest and Turkish Petroleum Corporation, the national oil company of Turkey will hold 30%.
The move by Dragon which ended last year with more than USD 1.5 billion in net cash on its balance sheet follows an aborted approach earlier this year for Bowleven, the oil explorer that hopes to develop gas fields off Cameroon in west Africa.
Dragon, whose main production assets are oil fields off the Caspian Sea coast of Turkmenistan has signalled its intention to increase it exploration base while maintaining a disciplined approach.
Mr Abdul Jaleel al Khalifa CEO of Dragon said that its success in the bidding represented a milestone for Dragon's exploration strategy in this country. Entry into Iraq has been under consideration for some time and so represents a strategic move for Dragon. However, the win by Dragon's consortium was one of only six blocks to be successfully auctioned on Wednesday while a further auction round last week secured just two successful applications for 6 more blocks. The move into Iraq's oil rich southern province comes amid a stand off between Ankara and the Iraqi government over the development of oil resources closes the Turkish border.
Last month Mr Taner Yildiz Turkey's energy minister announced his backing for plans by the Kurdistan Regional Government to build a pipeline capable of delivering 1 million barrels a day of oil from the semi autonomous region into his country. Plans for the pipeline have been attacked as hostile by the Iraqi government.
Protracted disputes between Baghdad and the KRG has led to the assumption that oil companies seeking to enter Iraq's northern Kurdish region would be barred from participating from developing fields in the rest of Iraq. But ExxonMobil's decision late last year to become the first oil major to invest in the Kurdistan region has challenged the assumption that Baghdad can hold the line against the growing list of companies dealing direct with the KRG.
Mr Caren Crowley analyst at Dublin based broker Davy commented after that auction that the sale was a disappointing outcome for the Iraqi government.
Mr Dragan Trajkov analyst at Renaissance Capital argued the bidding round was a clear rebuff for Iraq. In a note following initial reports of limited interest in the auction with the exception of Lukoil, no other super majors participated in the bidding process. Threats to bidders that they would lose their licences if they went to Kurdistan appeared to have backfired.
He said that in complete contrast to previous rounds, in which the government managed to surprise everyone and win some lucrative development contracts, this time roles have reversed. There is a big winner and it is not the companies with the winning bids. In our view it is the KRG.