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Iraq goes alone on gas
Published in The Saudi Gazette on 03 - 07 - 2009

Iraq plans to bring forward a second bidding round for major energy contracts and may give foreign firms another run at oilfields that were left over after this week's sale, which clinched only one deal.
The country's second bidding round of energy deals “was supposed to be at the end of the year but we have moved it up. We will announce the new date. It could be in the next few months,” oil ministry spokesman Asim Jihad said on Thursday.
That auction will follow on from Tuesday's tender for eight major oil and gas fields, Iraq's first energy sale since the 2003 US invasion and the first open run oil firms have had at the world's third largest reserves since Iraq nationalized the industry in 1972.
The auction awarded just one field, to a foreign group led by BP, a disappointment to those who had hoped the round would help Iraq quickly revive a struggling oil sector and boost production of about 2.4 million barrels per day.
The government in Baghdad nevertheless deemed the exercise as a success because the Rumaila field awarded to the BP-led group, which also included the China National Petroleum Corp. (CNPC), is a very large one.
The auction revealed a deep gulf between what the Iraqi government was willing to pay for developing the fields, most of which are already in production, and the fees foreign firms expected to earn.
Iraq desperately needs money to rebuild after six years of conflict and is widely viewed as unable to fix an oil sector damaged by decades of war, sanctions and neglect without the capital and expertise of international energy firms. Jihad said the unawarded oilfields might be offered in another bidding process, or could be added to the second round or in some cases might even be developed by a future National Oil Company, if the company is revived when the country passes the necessary legislation.
The second round is seen as even more lucrative than the first because the fields on offer have not yet been developed.
Deputy Prime Minister Barham Salih, speaking from the Kurdish city of Sulaimaniya, called the BP deal to develop the 17-billion-barrel Rumaila field, Iraq's biggest, “an important step forward and a signal.”
“We need to pursue a policy of maximizing production in the shortest time,” he told Reuters. “There are certain areas in which we find companies reluctant to come ... we may have to rely on our own resources and policies.”
Jihad said that the government planned to develop two major gas fields, Akkas and Mansuriyah, on its own after neither was awarded to a foreign bidder in Tuesday's auction.
“Akkas and Mansuriyah will be developed by the National Oil Company after approval of the new oil law,” Jihad said.
A group led by Italy's Edison was the sole bidder for Akkas, a 2.1-trillion cubic feet field in Iraq's vast western desert, but its proposed fee of $38 for each additional barrel of oil equivalent produced was far above the $8.50 a barrel Iraq suggested.
No agreement on Akkas or other unawarded fields was reached when the Iraqi cabinet reviewed the companies' bids, some of them revised, the day after the tender. All were rejected.
The creation of a new National Oil Co will depend on parliament passing long-delayed hydrocarbon legislation. The laws have been held up for years by feuding between the central government in Baghdad and minority Kurds in northern Iraq.


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