- Title: IRAQ: Iraqis react to oil contract auction
- Date: 13th December 2009
- Summary: (SOUNDBITE) (English) MAHMOUD OTHAMN, SENIOR KURDISH MEMBER OF IRAQ'S PARLIAMENT, SAYING: "There is controversy over it because there is no hydrocarbon law yet approved by the parliament, that's why I think this question is to be discussed thoroughly. There is also another point about it, a criticism that this is not approved by parliament. Usually laws like this should be
- Embargoed: 28th December 2009 12:00
- Keywords:
- Location: Iraq
- Country: Iraq
- Topics: Domestic Politics,Energy
- Reuters ID: LVA4NJ1NP0F16KLI5C8UX1I3U61G
- Story Text: Iraq, emerging from the shadow of war, expects to boost its oil output to rival the level of top producer Saudi Arabia after awarding some of its most attractive oilfields to global oil companies this week.
By the end of a two-day bidding round for 10 oil contracts on Saturday (December 12) -- the second auction since the 2003 U.S. invasion -- Iraq had received pledges from oil firms to boost its output by 4.765 million barrels per day, almost double its current output.
If all deals from a first auction in June, the second this weekend and others being negotiated are added to national production, Iraq will have a capacity of 12 million barrels per day, overtaking Russia and challenging Saudi Arabia's 12.5 million bpd, Oil Minister Hussain al-Shahristani said.
Some 30 international oil companies braved the threat of violence and attacks to come to Iraq, putting aside security concerns just days after car bombs killed 112 people in Baghdad.
Iraqis gave mixed opinions on the two-day oil auction with some supporting the government's move and others insisting it didn't serve the interest of the people.
"It is a step that should be taken because Iraq's investment potentiality are weak due to the political chaos and chaos represented by the current terrorist attacks. It means that Iraq is weak in this issue and in need of foreign investments. But the question here who will guarantee this transparency? Who will guarantee the transparency of the minister," said Baghdad resident Adel Ash-Shemari.
Another Iraqi from Baghdad, Hakeem al-Maliki, said:
"Any investment that has been done in oil, agriculture and industry is for the country but only if it works according to studied contexts and general laws that should be agreed by politicians and people. We've heard of investments before - seven years ago - but citizens can't see anything from this investment, they don't know what they are investing. The parliamentarians are rejecting them and politicians are approving them and there are conflicts. But in general if investment is for the people, it will be good and if it is for the interest of others, foreigners, foreign companies that serve interests of foreign countries, it will not serve the citizen."
Oil majors from the United States appeared conspicuously uninterested in the fields on offer in the second round, confounding expectations that they might end up with the lion's share of Iraq's oil sector as a result of the U.S.-led war.
Security may still be an issue. The series of car bombs on Tuesday (December 8) was the third major assault on government buildings in Baghdad in four months and a bloody reminder of the fragile security as Iraq heads into a general election in March.
Thousands of Iraqi soldiers and police were deployed in the streets of the capital to protect the auction and army helicopters buzzed overhead. Oil executives travelled around town in convoys of armoured SUVs with armed guards.
As for Iraqi lawmakers, they insisted the bidding was illegal and that Iraqi government and the ministry of oil had no legal right to sign any contract with foreign companies as there was no law approved by the parliament.
"There is controversy over it because there is no hydrocarbon law yet approved by the parliament, that's why I think this question is to be discussed thoroughly. There is also another point about it, a criticism that this is not approved by parliament. Usually laws like this should be approved by parliament but the Ministry of Oil they say that they does not need approval of the parliament because it is not an agreement between Iraq and an outside country but it is only some contracts given to companies by the Iraqi government. So, the Iraqi government is enough to approve this, that's why there's a lot of controversy over this issue," said Mahmoud Othman, senior Kurdish member of Iraqi parliament.
This opinion was backed by another Kurdish parliamentarian, the head of parliament's oil and gas committee, Ali Hussein Balou.
"It's not under the authority of the federal government, the minister of oil and the cabinet to sign contracts without special laws. For example, Law 97 of 1976, article three, of item 2, confirms it is forbidden to sign any contract with foreign companies in the oil sector without special laws, and the law should be issued by the Iraqi parliament as it is the legal representative for the people in this sector, so the contracts that have been signed currently either in the first bidding round in Rumaila, West Qurna, Zubair, Majnoon, Helfayah, and the other contracts, according to the Iraqi law, are illegal," Ali Hussein Balou said.
Amid fierce competition, a group led by Russian energy giant Lukoil won a deal to develop the West Qurna Phase Two oilfield, which with 12.9 billion barrels of reserves is one of the world's largest untapped "supergiant" fields.
Supergiants are fields of 5 billion barrels or more.
On the first day of the auction on Friday (December 11), the 12.6 billion barrel supergiant Majnoon field went to a partnership of Royal Dutch Shell and Malaysia's Petronas.
The Russian company's win of West Qurna is made sweeter by the fact it had lobbied unsuccessfully since the 2003 U.S. invasion to revive a Saddam Hussein-era contract for the field.
Only two of the five fields on offer on Friday were initially awarded as oil firms steered clear of more dangerous or troublesome areas, including the supergiant East Baghdad oilfield that lies in part under Baghdad's Sadr City slum and fields in the north where violence is still rife.
The Qayara field in the north near the violent city of Mosul, which was not awarded on Friday, was won by Angolan state-oil firm Sonangol on Saturday after the company changed its mind about accepting the government's proposed $5 per barrel fee. Sonangol had wanted more than twice that.
Sonangol on Saturday also won another northern field, Najmah, after accepting a lower fee than it wanted.
But for other fields, the companies actually asked for less than the government was willing to pay.
Royal Dutch Shell and Malaysia's Petronas won Majnoon with a proposed a fee of 1.39 U.S. dollars (USD) per barrel and pledging to increase output to 1.8 million bpd, more than double what Iraq expected.
Halfaya, with 4.1 billion barrels of reserves, was some consolation. CNPC, Total and Petronas won it with a fee of 1.40 USD per barrel and a plateau production target of 535,000 bpd.
The Lukoil and Statoil partnership for West Qurna Phase Two proposed a fee per barrel of 1.15 USD and a plateau production level of 1.8 million bpd.
The smaller Gharaf field was won by Malaysia's Petronas and Japanese oil company Japex, with a fee of 1.49 USD per barrel and plateau output target of 230,000 bpd.
Other winners were a group led by Russia's Gazprom for a deal to develop the Badrah oilfield. The group agreed to a 5.50 USD per barrel fee and a production target of 170,000 bpd. - Copyright Holder: REUTERS
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