Iraq failed to attract investment from oil majors in its oil and gas exploration/development contract auction yesterday, with no major companies winning any bids and only Italy’s Eni making one.
The Oil Ministry held an auction to award contracts to international energy companies, with 11 blocks on offer near the borders with Iran and Kuwait and in offshore Gulf waters. “We have decided to speed up the development of border fields after five decades without investments… leaving them without investments meant wasting the oil wealth of the country,” Oil Minister Jabar al-Luaibi said ahead of bidding.
“I say to the companies (that will bid), ‘thank you’ because this means trusting Iraq… and it means services and education for the citizens who live in the regions where you are going to operate,” he added. Five of the exploration blocks failed to attract any bids. Three went to Iraqi-owned, United Arab Emirates-based Crescent Petroleum, two to China’s Geo-Jade, and one to United Energy Group, also based in China. Eni made one unsuccessful bid, while no other majors bid.
Fourteen companies had expressed interest in the contracts and bought a package containing the bidding documents and terms for the 11 blocks, the ministry had said on April 14. “It is a very successful round. As an Iraqi company it’s not a commercial matter, it’s about investing and developing the production of Iraq,” Crescent executive director Abdullah al-Qadi told Reuters. The blocks were initially to be auctioned in June. The date was brought forward to April 15, then postponed to April 25 to give bidders more time, the oil ministry had said.
A combination of factors was behind the failure by five blocks to draw bids, said Abdul Mahdy al-Ameedi, director-general of Iraq’s Petroleum Contracts and Licensing Directorate. Some cover former battlefields, some are hard to access and the one offshore plot needs more data, he said. Ameedi said another round could be held for the five blocks but provided no further details. The contracts on offer excluded oil by-products from the companies’ revenue, established a link between prevailing oil prices and their remuneration, and introduced a royalty element. Oil companies operating in Iraq currently receive a fee from the government linked to production increases, which include crude and oil by-products such as liquefied petroleum gas.
Opec’s second-largest producer after Saudi Arabia, Iraq decided to change the contracts after a glut caused oil prices to crash in 2014, reducing Baghdad’s ability to pay such fees. Companies including BP, ExxonMobil, Eni, Total, Royal Dutch Shell and Lukoil have helped Iraq expand production in the past decade by over 2.5mn barrels per day to about 4.7mn bpd.
Sources and photo-credits: Gulf Times