Iraq opened up some of its massive oil and gas fields to foreign firms today, kicking off a landmark licensing round it hopes will help fuel its post-war reconstruction efforts.
In a televised ceremony, international oil companies were invited to submit bids for six oil and two gas fields, a process that marked their return to the country over 30 years after Saddam Hussein nationalised the oil sector and expelled the foreign firms.
The licensing round coincided with Iraq assuming formal control over its cities - a defining step toward ending the US’s combat role in the country.
That has raised worries about a new escalation of violence that could complicate business for oil companies, already concerned about some lawmakers’ objections to the bidding process.
Iraqi Prime Minister Nouri al-Maliki sought to allay companies’ concerns, telling executives from the more than 30 international firms vying for the 20-year service contracts that the government would do all it can to secure their interests.
Mr Al-Maliki said the government would “offer security protection, offer all guarantees for their investments and offer all the facilities needed to ensure the success of this process”.
The fields on offer hold about 43 billion of Iraq’s 115 billion barrels of crude reserves -among the largest in the world.
The process seemed to run into difficulties for the first two fields on offer. Two consortiums submitted offers for the Rumaila oil field, which holds 17.8 billion barrels in crude reserves.
BP and China’s CNPC made up the first consortium while US giant Exxon Mobil and Malaysia’s Petronas comprised the second.
Under the service contracts, the companies would be paid a per barrel fee for any crude they produce in excess of a minimum production target.
Both groups were asked to revise their bids, said Oil Minister Hussain al-Shahristani, because they were asking for more money per barrel than the government wanted.
No bids were offered on the second field on offer, Mansouri.
The field, located in the restive Diyala province, is an undeveloped gas field estimated to hold 3.3 trillion cubic feet of reserves with production potential of 330 million cubic feet a day. That province has seen some of Iraq’s worst violence.
Iraqi officials have estimated that based on crude oil at $50 per barrel, the companies could earn around $16 billion in total while Iraq would bring in over $1.7 trillion.
Complicating the effort is the lack of a national oil law. Some analysts have said this could leave oil companies vulnerable to having their contracts voided by a subsequent government.
AP/Reuters