Iraq will next week provide foreign oil and gas companies with details of the contracts under which it hopes the companies will help boost the country’s oil output by 1.5 million barrels per day.
A delegation led by Iraq’s oil minister Hussain al-Shahristani will present prequalified companies at a meeting in London on Monday with geological data on the fields, as well as details on the financial terms of the contracts and the process for applying.
Bill Cline of consultants Gaffney Cline, which is helping organize the roadshow, said that although some companies have been working with Iraq on studies of the fields for some years, the presentation will make sure all compete on an even basis. Royal Dutch Shell and BP were among the companies that helped appraise the fields.
The contracts on offer are service contracts, which mean the winners will be paid a flat fee to produce the oil rather than receive an equity stake in the fields or any share of profits. Forty-one companies, including most of the big international oil companies, have qualified to bid. Cline said he expected companies to have to take away the information they receive and study it closely before deciding whether to bid. Oil executives agreed that no decisions were likely to be made on Monday. “There won’t be any negotiation,” a source at one of the oil companies that will attend said.
While the improved security climate in Iraq is easing one main deterrent to investment in Iraq, oil companies generally do not like service contracts as these cap their gains. However, Muhammad-Ali Zainy, senior energy economist at the Centre for Global Energy Studies, said the contracts will attract strong interest. “I think there is going to be some severe competition,” he said. “There is nothing wrong with the format of the contracts. There are reasonable. They are 20 years long”.
The oil fields open for long-tern development contracts are Rumaila, Kirkuk, Zubair, West Qurna Phase 1, Bai Hassan and the Maysan fields. Maysan comprises three fields, Bazargan, Abu Gharab and Fakka. Two gas fields, Akkas and Mansuriyah, are also open. Iraq said it wants to sign the deals by mid-2009. (Reuters)