Iraq's Second Oil Bidding Round Needs Higher Fees to Succeed

Iraq, which awarded only one oil field contract in June because of disagreements over fees, needs to pay more to attract foreign bidders in the second round of licensing, according to former state officials and analysts.

International companies vying for the untapped deposits, including Majnoon, Iraq’s largest undeveloped field, want higher returns for working in a country lacking security and an oil law. Contracts to be awarded in November may be delayed until after a January election and revised if the government changes.
“Even if contracts are awarded, their implementation depends on how the Iraqi situation evolves,” Leila Benali, director of Middle East and Africa at Cambridge Energy Research Associates, said in a phone interview from Paris. “Contracts may not be ratified, there could be several legal or operational problems. There are many stumbling blocks.”

Iraq, which holds the world’s third-largest oil reserves, is offering 10 projects covering more than a dozen oil fields for development in its second oil-licensing round since the 2003 U.S.-led invasion. Unrestrained by OPEC quotas, it wants to increase crude revenue to help rebuild its war-ravaged economy.

Officials will share field data and discuss contractual terms with pre-qualified companies in Istanbul tomorrow, before receiving and evaluating bids at a later date. The undeveloped fields are estimated to contain 41 billion barrels-worth of oil, more than a third of Iraq’s total reserves, according to the U.S. Energy Information Administration.

Bloomberg