Live: Oil companies bid for Iraq’s oil fields - Rest of landmark auction is less successful

Live: Oil companies bid for Iraq’s oil fields - Rest of landmark auction is less successful
By Carola Hoyos
Copyright The Financial Times Limited 2009
June 30, 2009 2:42pm
http://blogs.ft.com/energy-source/2009/06/30/live-oil-companies-bid-for-iraqs-oil-fields/


BP and CNPC have won the right to help Iraq develop the Rumaila field. The UK and Chinese companies beat ExxonMobil, the US oil company, which had partnered with Petronas, the Malaysian oil company. BP clinched the contract when it agreed to reduce its fee per barrel from $3.99 to $2.

But the rest of the auction has not gone as smoothly. In fact, so far, the smaller five of the eight oil and gas fields being auctioned off have failed to find a company willing to accept the narrow terms and the relatively low price Iraq is willing to pay for their services. And the future of West Qurna, the biggest of the fields, is looking in doubt after ExxonMobil and CNPC both rejected Iraq’s tougher terms. Royal Dutch Shell has bid for Kirkuk, bit no winner has been announced for that field.

Today had marked the beginning of a long-awaited journey. Braving sand storms and the continued violence on Iraq’s streets, oil executives had come to Baghdad to make their bids. It was the first time since nationalisation more than 30 years ago that international oil companies would be allowed back into the country.

After much debate, Iraq had decided to allow foreign oil companies to help repair its oil developments, which have been plagued by years of war, sanctions and violence. The companies will be paid a fee for their service, but they hope their willingness to accept such narrow terms eventually could lead to more lucrative exploration and development deals.

Kicking off the bidding ceremony, Nuri Al-Maliki, the country’s prime minister, promised Iraq would make even more fields available to international companies that want to develop them.

Bid envelopes for the fields were opened every 45 minutes to an hour. They contained two numbers - the per barrel fee the company proposes to charge Iraq for helping repair the field and the point at which it believes the field will plateau.

The plateau is not only an engineering ambition, but also decides at what point companies begin to make money. Thus the lower the first number and the higher the second, the more likely the bid would win the contract.

Here is the line-up for other contracts auctioned so far:

The Mansuriyah gas field got no bids.

There were four bids from different consortia for the Zubair oilfield. But in the end the winning bidder rejected the terms on which Iraq was insisting and the field went unawarded. The groups that had initially bid were BP , together with CNPC; India’s ONGC with Gazprom Russia and Turkish Petroleum Corp. The third was headed by Italy’s ENI, with China’s Sinopec, Occidental and Korean Gas; and the fourth was led by Exxon Mobil, with Royal Dutch Shell and Petronas.

The Maysan field failed to find a developer as Iraq and the single consortium that bid (Cnooc and Sinochem) could not agree the terms.

The Kirkuk field got one bid by a group led by Royal Dutch Shell and including Sinopec and the Turkish Petroleum Corp.

The Bai Hassan failed to find a developer as Iraq and the ConocoPhillips-led consortium that bid on it failed to agree terms.

The West Qurna field got five bids, but its future hangs in the balance after ExxonMobil and CNPC both rejected Iraq’s tougher terms.

The Akkas gas field got one bid from a group led by Edison.

The the group led by Cnooc, the Chinese oil company, that bid on the Missan oil field, ended up rejecting Iraq’s tougher terms.