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Britain's BP, Chinese oil firm win Iraq deals

(Agencies)
Updated: 2009-07-01 10:31

The Oil Ministry failed to find takers for another huge field, Kirkuk, and for the smaller Bai Hassan, Maysan and Zubair fields, after Chinese, Italian, British and US-led consortia rejected its terms. The companies also wanted a much higher fee for each extra barrel produced than it was willing to pay.

No bids were received for Iraq's Mansuriyah gas field and no deal was agreed on the Akkas gas field.

The BP/CNPC alliance had to accept a fee of $2 for every barrel of additional oil produced, compared with $3.99 in its initial offer. It also projected being able to boost output from Rumaila to an ambitious 2.85 million barrels per day, compared to the government's target of 1.75 million barrels per day.

The only group to bid for the Kirkuk oilfield, which lies in a northern region contested by minority Kurds and the Arab-led government in Baghdad, was led by Royal Dutch Shell. Shell wanted to be paid $7.89 per extra barrel of oil while the Iraqi government offered $2 again.

"The expectations of the Iraqi government and the oil companies are mismatched," one oil executive, who asked not to be named, told Reuters.

Security Still an Issue

Foreign companies working in Iraq will have to contend not only with security risks from a still stubborn insurgency, but also discontent within ruling circles and political uncertainty.

Some Iraqi lawmakers condemn the deals as illegal and even officials in the state-run oil industry have criticised the government for selling Iraq's vast oil wealth short, especially as the country has already invested heavily in the fields.

Years after Saddam's removal was supposed to unleash Iraq's oil potential, the auction marked the first big moment for the Oil Ministry, which is under growing pressure to boost disappointing output of around 2.4 million barrels a day.

Tuesday's tender was a central plank of Oil Minister Hussain al-Shahristani's aim to boost oil output to 6 million barrels per day in five years. Shahristani said he was pleasantly surprised at how ambitious some of the projections were from oil companies for potential increases to production at the fields.

Iraq has proven oil reserves of 115 billion barrels, but the true amount of hydrocarbons sitting beneath its desolate deserts could be far greater.

The auction, delayed by a day by a sandstorm, was broadcast live from a hotel in Baghdad's fortified Green Zone in a process Iraqi oil officials insisted would be fully transparent.

Later this year, Iraq is due to offer another set of fields that are even more appealing since they are undeveloped.

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