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OO RUEHAG RUEHAST RUEHDA RUEHDBU RUEHDF RUEHFL RUEHIK RUEHKW RUEHLA
RUEHLN RUEHLZ RUEHNP RUEHPOD RUEHROV RUEHSK RUEHSR RUEHVK RUEHYG
DE RUEHVI #0596 1391037
ZNR UUUUU ZZH
O 191037Z MAY 09
FM AMEMBASSY VIENNA
TO RUEHC/SECSTATE WASHDC IMMEDIATE 2594
INFO RHEBAAA/DEPT OF ENERGY WASHDC PRIORITY
RUCPDOC/DEPT OF COMMERCE WASHDC PRIORITY
RUEHZL/EUROPEAN POLITICAL COLLECTIVE PRIORITY
RUEHGB/AMEMBASSY BAGHDAD PRIORITY 0267

UNCLAS VIENNA 000596 
 
SIPDIS, SENSITIVE 
 
E.O. 12958: N/A 
TAGS: ENRG ECON PGOV EPET AU
SUBJECT: OMV Buys Stake in Northern Iraq Gas Exploration/ 
Production, Aims To Feed Nabucco Pipeline after 015 
 
Sensitive but Unclassified - Protect Accordngly. 
 
¶1. (U) SUMMARY:  Austria's OMV has boughta 10% stake in two gas 
fields in Iraq's Kurdish rgion, which it hopes will become major 
suppliersto the Nabucco pipeline sometime after 2015.  Whil 
confident of its legal position, OMV recognizesthe absence of a 
national hydocarbon law is problematic, but is hopeful for a 
resolution well before the fields (and Nabucco) come on-line.  END 
SUMMARY. 
 
¶2. (U) On May 17, Austrian oil/gas national OMV announced the 
purchase of a 10% stake in Pearl Petroleum, a subsidiary of 
UAE-based companies "Crescent Petroleum" and "Dana Gas" which hold 
rights to two gas-condensate fields near Kirkuk in Iraq's Kurdish 
region (Kurdistan Regional Government/KRG).  OMV will pay $350 
million for the stake initially, with further payments contingent on 
better reserve data.  Based on current assessments, OMV hopes annual 
production will reach 30 billion cubic meters (bcm) around 2015. 
NOTE: Of the two fields, one (Khor Mor) is already producing gas 
while the other (Chemchemal) is still being assessed. 
 
¶3. (U) Nabucco Company CEO Reinhard Mitschek (who is closely tied to 
OMV) said publicly that Iraqi/KRG gas exports could account for 
approximately one third of the Nabucco pipeline's capacity (31 
bcm/year).  Mitschek said that whereas the consortium hopes to bring 
Nabucco online in 2014, the timeline for linking Iraqi/KRG gas 
fields to Nabucco remains undecided. 
 
¶4. (SBU) An Embassy representative spoke briefly with Peter Seifert 
of OMV's Exploration & Production (E&P) Department.  Seifert 
declined to speculate about gas volumes for Nabucco but said the new 
fields should provide a "significant share" of the pipeline's gas at 
some point after 2015.  The concession contract with KRG authorities 
stipulates that domestic and regional markets have priority in gas 
sales, Seifert noted, but OMV estimates that up to two-thirds could 
still be exported from Iraq with Turkish customers taking half of 
the exported volume.  OMV and its UAE partners have agreed that the 
ultimate price for OMV's 10% stake is contingent on gas discoveries 
beyond current reserve estimates. 
 
¶5. (SBU) The original E&P licenses for the two fields were issued by 
KRG authorities, a known point of contention within Iraq.  Seifert 
maintains that OMV's lawyers and outside counsel thoroughly examined 
the legal situation and surmise that the KRG is entitled to grant 
E&P licenses to foreign companies under Iraq's federal constitution. 
 OMV is well aware that Iraq's federal government did not endorse 
the original licenses, and OMV does not rule out further sanctions 
such as those as imposed in February 2008 after OMV announced two 
other production-sharing agreements with the KRG.  But OMV sees 
limited ability for Iraqi federal authorities to "punish" OMV in the 
near term by blocking its oil exports, since OMV has limited 
interest in Iraq's oil.  Seifert is hoping for an Iraqi domestic 
solution in the near future -- the adoption of a hydrocarbon law or 
a similar legal act -- since many in the region see Iraq's Federal 
Oil Ministry as "isolated" on this issue. 
 
ORDWAY