Iraq is sweetening the terms to be offered to international companies ahead of a new bidding round for 12 exploration blocks, a senior Oil Ministry official said Wednesday.
Iraq
is
sweetening the terms to be offered to international companies ahead of a new
bidding round for 12 exploration blocks, a senior Oil Ministry official said
Wednesday.
The move comes as some oil majors, including France's Total SA (TOT) and
ExxonMobil Corp. (XOM) of the
U.S.
, have
shown more interest in exploration in the country's northern semi-autonomous
Kurdistan
region than from the middle and south, which are controlled by the central
government.
"We are making positive changes to the [service] model contract for the
fourth bidding round," Abdul Mahdy al-Ameedi, head of the Oil Ministry's
Petroleum Contracts and Licensing Directorate told Dow Jones Newswires. He
declined to give details, but said that the changes would "achieve the
economic interests of companies."
Ameedi did say that the ministry has changed a provision that allowed
Iraq
to
postpone development of fields, to seven years from the date of announcement of
commercial amounts of oil or gas discovered in the block, which was mentioned
in the previous model contract and was one of the terms disliked by potential
bidders.
"We have dealt with this provision in a way which will be acceptable by
companies," he said, but gave no further details.
Bidding companies will be informed of the changes in the coming two days, he
said.
Iraq
is
planning in May to auction 12 promising exploration blocks, seven of which are
believed to contain natural gas, and five thought to contain crude. The new bid
round, expected to add some 10 billion barrels of crude oil and some 29
trillion cubic feet of gas to Iraq's reserves, has already been delayed twice
amid arguments on whether the contracts offered should be of the
production-sharing type wanted by the explorers or the fixed-fee service
contracts wanted by the government.
For the fourth bidding round,
Baghdad
has
so far refused to offer industry-standard production sharing contracts, where
the oil company owns a portion of the oil in the ground and can profit from its
sale. It is instead insisting on service contracts that pay companies a fixed
fee for the amount of oil they produce.
As a result, Total has become the latest big oil company to shift the focus of
its
Iraq
ambitions toward the
Kurdistan
region, and away from the
much larger but economically challenging contracts offered by
Baghdad
. Total's
chief executive said Friday he didn't plan to chase contracts in
Baghdad
's
fourth licensing round. ExxonMobil signed last year a contract with
Kurdistan
, a
move which angered
Baghdad
and
lead to the giant
U.S.
firm
being threatened with losing its contract in southern
Iraq
.
Iraq
said
that it had qualified some 46 international firms, including the world's
largest, to bid for the 12 blocks in the latest round. Ameedi had previously
said that some 37 out of the 46 firms had already paid participation fees.
Baghdad
has signed a series of deals
with international companies in a bid to boost production capacity to 12
million barrels a day from nearly 3 million barrels a day presently.
The fourth bid round will help
Iraq
maintain and increase reserves to offset expected depletion and could
strengthen its case to have the Organization of Petroleum Exporting Countries
set an export quota for
Baghdad
.
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