IRAQ: Oil experts say auction must bring benefits for the country

Record ID: 343562

  • Title: IRAQ: Oil experts say auction must bring benefits for the country
  • Date: 10th December 2009
  • Summary: RUMAILA OILFIELDS, IRAQ (FILE - DECEMBER 2, 2009) (REUTERS): VARIOUS OF OF FLAMES AND THICK BLACK SMOKE RISING FROM OIL FIELD OIL WORKERS AT WORK/FLAMES RISING IN BACKGROUND
  • Embargoed: 25th December 2009 12:00
  • Keywords:
  • Location: Iraq
  • Country: Iraq
  • Topics: Energy
  • Reuters ID: LVA3ZQDRHWNJYAHGR3SBELZTKYSO
  • Story Text: Iraqi oil experts say the upcoming oil auction, due to take place later this week, must bring benefits for Iraqis and should not result in a production sharing agreement.
    Ten largely untapped oilfields will be up for grabs, including "supergiant" fields like Majnoon with 12.6 billion barrels in estimated reserves, and West Qurna phase two, which has 12.9 billion barrels of oil.
    They rank among the biggest, most accessible hydrocarbon deposits left on earth, and could add more than 2.6 million barrels per day to Iraq's oil output of 2.5 million bpd - helping to catapult the country into the top league of global oil producers The General Secretary of Iraq's Oil Syndicates Union said the country would benefit greatly from the foreign investment.
    "Actually, the second bidding round has no disadvantages because these oilfields are undeveloped or semi-developed. In addition, we need financial liquidity and technical capabilities and we also need drilling companies, executive companies and companies that can build pipelines, etc.
    Frankly, these are capabilities that we don't have now," said Faruq Mohammed.
    However, he said Iraqi oil experts objected to the first bidding round because the contracts were production sharing contracts which allow to the foreign companies to have control over Iraqi political and economic decisions.
    "These companies are going to invest, but how will they invest? Are they going to invest by 'production sharing', as you say in English i.e. sharing what is produced? If this is the result, I don't think there is a single Iraqi who would accept this principle because if we allow foreign companies to interfere in our political decisions it will have a negative effect on the entire Iraqi process," warned Mohammed.
    Forty-five companies are qualified to compete on December 11-12 in Iraq's second bidding round since the U.S.-led invasion in 2003.
    These include giants such as Exxon Mobil, Royal Dutch Shell, BP, Chevron and Total.
    If they bear fruit, the contracts that are emerging from the first auction in June and those that will be struck this week, plus other deals being pursued separately, could take Iraqi oil output capacity up to levels that rival Russia's 10 million bpd and Saudi Arabia's 12.5 million bpd.
    That would bring in the billions of dollars that Iraq needs to rebuild after decades of war, international sanctions imposed for the 1990 Kuwait occupation, and the neglect and sabotage that accompanied the years of warfare since the U.S. invasion.
    However, oil expert and deputy head of central council of oil syndicates, Falih Aboud al-Assadi, said he had reservations about the upcoming bidding round.
    "Iraq needs to develop its oil sector not have another bidding round. We can develop the oil sector by investment through national efforts or by foreign companies but on condition that the contract should be a service contract, not a production sharing contract. We are not against modern oil technology - we need to develop the oil sector, but far from the bidding rounds," he said.
    The auction is still going ahead despite a series of car bombs in the capital that killed 112 people on Tuesday and rattled the windows of the Oil Ministry, where the bidding round is due to be held.
    The auction on Friday and Saturday will be broadcast live from the Ministry, a heavily-guarded complex outside the secure Green Zone of government agencies and embassies.
    The contracts are 20-year deals that pay per-barrel remuneration fees. Winners will be selected based on the fee the consortiums are willing to accept, their projected initial oil production levels and ultimate plateau production targets.
    BP and Chinese partners CNPC won Rumaila, Iraq's biggest oilfield, after accepting a fee of just two US dollars for each additional barrel of oil produced. That was half what they had wanted.
    But Iraq and the oil majors have negotiated more deals since then and had time to better understand each other's expectations, executives say. That means the second round may see more bids and be more competitive.
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