Iraq historic oil and gas auction off to shaky start

Iraq auctioned off eight giant oil and gas fields on Tuesday in its first major tender since the 2003 invasion, but there appeared to be a big gulf between what Iraq was willing to pay and firms willing to accept.

The tender was billed as the first opportunity since Iraq nationalised its oil sector in 1972 for foreign oil majors to get a foothold in a country with some of the world’s largest untapped reserves.

A BP-led consortium including China’s CNPC accepted a contract to develop the biggest oilfield, the south’s 17-billion barrel Rumaila, but only after an Exxon Mobil-led group rejected the government’s proposed per barrel fee.

No bids were received for the Mansuriyah gas field and only one, from a ConocoPhillips-led alliance, for the Bai Hassan oilfield in the northern Kirkuk province, contested by semi-autonomous Kurds and the Arab-led government in Baghdad.

The Oil Ministry received four bids for the four-billion barrel Zubair oilfield: one from a group led by BP Plc, a second headed by India’s ONGC, a third led by Italy’s ENI, and the fourth consortium headed by Exxon Mobil.

Vast reserves
The companies are wading into a morass of controversy surrounding the deals, which some Iraqi lawmakers condemn as illegal and which even some in the state-run oil industry have criticised for selling Iraq’s vast oil wealth short.

More than six years after Saddam Hussein’s ouster was supposed to unleash Iraq’s oil potential, the auction marked the first real centre-stage moment for the Oil Ministry, which is under growing pressure to boost disappointing output of about 2,4-million barrels a day.

Iraq has proven oil reserves of 115-billion barrels, the world’s third largest, but the true amount of hydrocarbons sitting beneath its desolate deserts could be far greater.

The auction, delayed by a day by a sandstorm, was broadcast live from a hotel in Baghdad’s fortified Green Zone in a process Iraqi oil officials insisted would be fully transparent.

It appeared to live up to that promise.

But when the bidding turned out to be less enthusiastic than hoped, the Oil Ministry called a time-out to allow the bidders for Rumaila and Bai Hassan to reconsider whether they were willing to accept the ministry’s proposed maximum fee.

The auction of the remaining oilfields and one gas field continued after the break.

Later this year Iraq is due to offer another set of fields that are even more appealing since they are undeveloped. — Reuters

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