Petronas Operations in Iraq

= History =

The contracts signed by Petronas in 2009 marked the beginning of their operations in Iraq. Petronas was the most prolific bidder in Iraq's second licensing round that year, submitting five bids and winning four.

Petronas operates in Iraq via fully owned subsidiary Petronas Iraq Garraf Ltd (formerly known as Petraonas Carigali Iraq Ltd), the head office of which is in Dubai.

=Activities and Contracts=

Garraf
A consortium led by Petronas submitted a bid for development of the Garraf field on the first day of bidding in December 2009. According to leaked US diplomatic cables, the undeveloped Garraf field was one of the first two fields offered, which received bids at 'stunningly low prices'. The partners in the winning consortium were Petronas (60%) interest and Japex (40%).

Halfaya
Petronas held a 25% interest in the winning consortium bidding for the Halfaya field. Other partners were CNPC (the operator with 50%) and Total (25%). The remuneration fee offered was $1.40 per barrel. The contract was signed on the 27 January 2010.

Majnoon
Petronas also signed a 20-year service contract to develop the Majnoon field, along with international oil company Shell. Shell is the lead operator in the consortium with a 45% stake. Petronas holds 30% and the Iraqi state holds 25%.

Badra
Only one consortium, led by Gazprom, bid for the Badra contract area in the second licensing round. The Oil Ministry announced in December 2009 that it had accepted a revised bid from the consortium, which comprised of Gazprom (30%), Korean Gas Company (22.5%), Petronas (15%) and TPAO (7.5%). The 25% Iraqi state partner was the Oil Exploration Company.

=Community Relations=

According to Iraq Oil Report Petronas has experiences a serious of problems in its relationship with the local community, since beginning operations in the country in 2009.

In 2010 tribal leaders near the Garraf field demanded that Petronas compensate them for developments in the region, causing the exploration unit to halt its work. Among the issues raised by the tribal leaders was the damage done by pipelines to local agriculture, a claim refuted by local officials. Abdul Hussein Hadi Hajr, technical adviser to Dhi Qar's provincial council, said that tribal leaders had engaged in extortion using violent threats against both Petronas and Iraqi state companies. An Oil Ministry spokesman said that any attempt by the tribes to negotiate a compensation package directly with Petronas was against the law.

In early 2012 security guards at the Garraf site staged a sit-in protest against the company, demanding wage parity with security guards at the Ahdab oil field and compensation for landowners negatively affected by operations. In addition, locals have protested about pollution levels at Garraf, accusing Petronas of not utilising a proper incinerator for disposing of test oil. State officials put the problem down to the heavy nature of the oil at the site, which creates more smoke, but Dhi Qar's Environment Director Raji Nu'eima Minshid commented that they should abide by pledges made in their environmental impact assessment (EIA) and threatened legal action by the Environment Ministry.

In a further blow to the company's operations, in November 2012 villagers from near the Garraf field stormed the field offices of Petronas and damaged much equipment. The unrest followed a dispute over Shiite religious observances, in what is a religiously conservative region of Iraq, sparked when Petronas employees allegedly removed flags hung to celebrate the start of the month of Muharram. As a result of the events, one Malaysian and one Iraqi were hospitalised.

=References=