After last year's two successful oil licensing auctions, Iraq is inviting international companies to compete once again Wednesday this time for three major gas fields that contain more than 11 trillion cubic feet of proven reserves.
After last year's two successful oil licensing auctions, Iraq is
inviting international companies to compete once again Wednesday this time for
three major gas fields that contain more than 11 trillion cubic feet of proven
reserves.
Baghdad
has done little to produce
gas from its estimated proven reserves of 112 trillion cubic feet--the
fifth-most in the region according to U.S. Energy Information Administration
data.
Iraq
,
however, is only producing 1.6 billion cubic feet a day of gas, half of which
is flared because of lack of infrastructure.
With ambitious power generation targets and longer-term export aspirations,
Baghdad
is
offering Akkas field in the western Anbar province, Mansouriya in Diyala east
of
Baghdad
and
Siba in southern
Basra
governorate.
"Our goal from awarding these three fields is to fuel turbines recently
ordered by the electricity ministry," Abdul Kareem Luaibi, the deputy oil
minister told Dow Jones Newswires.
But, the competition is not expected to be as aggressive as in the two auctions
held in July and December 2009 when more than 32 international firms took part.
In this bidding round only 13 international companies have shown interest in
participating.
"I am not expecting the gas bidding round to be as competitive as the
previous ones," Deputy Oil Minister Abdul Kareem Luaibi told Dow Jones. But
he said: "There will be competition and there are companies which are
interested in these fields."
According to the 20-year model contract, international firms would have a 75%
stake in the joint venture, with state-owned Iraqi operators at the field
holding the remaining 25%.
Winning companies will be determined according to parameters already laid out
by the oil ministry. They call for an incremental remuneration fee for each
barrel of oil equivalent and a production plateau target. The company that
charges the least for each produced barrel of oil equivalent and commits to the
highest output target would be most likely to win a contract.
If the awards process goes well, the outgoing government of Prime Minister
Nouri al-Maliki needs to approve the contracts before it goes. Iraqi politicians
have been wrangling to form a government since the country's general elections
held in March this year.
The Akkas and Mansouriya fields were offered in the country's first licensing
auction, held in June last year. Only one company submitted an offer for Akkas
in that bidding round, which was rejected by the oil ministry. None of the
competing companies submitted an offer for the Mansouriya field.
A consortium led by
Italy
's
Edison SpA (EDN.MI), which was the sole bidder for the Akkas field, was rejected
because it sought $38 for each barrel of oil equivalent produced--much higher
than the $8.50 maximum remuneration fee offered by the ministry.
The Siba gas field, located in southern
Iraq
near
the border with
Iran
, was
dropped from the list of oil and gas fields in the second bidding round which
took place in December.
The 13 international companies which are expected to take part in the auction
are: France's Total SA (TOT), Norway's Statoil ASA (STO), Italy's Edison SpA,
Kazakhstan's KazMunaiGas EP JSC (RDGZ.KZ), Turkish Petroleum International Co.,
or TPAO, Japan Oil, Gas and Metals National Corp., or Jogmec, Japan's Itochu
Corp. (8001.TO), Kuwait Energy, India's Oil and Natural Gas Corp., or ONGC,
(500312.BY), Korea Gas Corp. or Kogas, (036460.SE), TNK-BP Ltd., BP PLC's (BP)
Russian joint venture, Japan's Mitsubishi (4182.TO) and Italy's Eni SpA (E).
Edison
, however, is said to be withdrawing from the race
because shareholders think that Akkas project is not profitable enough for
them.
Iraq
awarded
11 oil deals to international companies during the first and second bidding
rounds last year with the aim of boosting its crude oil production to 12
million barrels a day in six to seven years.
Iraq
is
currently producing around 2.5 million barrels a day.
The Iraqi Oil Ministry had further sweetened commercial terms in the final
model contract it released earlier last month in an attempt to entice
international firms. It has dropped an earlier condition that winning companies
should export 50% of the output from these fields.
The ministry has agreed to take or pay for all of the gas produced from these
fields. Additional improvement to the 20-year-technical service contract
includes a reduction in the annual training commitment to $1 million from $5
million, he said.
In a roadshow for the gas licensing auction held in
Istanbul
in
August,
Baghdad
dropped demands for signature bonuses. International companies have been paying
bonuses ranging between $100 million and $500 million for deals they won in the
first and second licensing auctions held last year.
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