BP and its Chinese partner secured access to Iraq’s biggest oilfield yesterday in a televised auction that descended into near-farce.
The British oil group and CNPC accepted a contract to develop the 17 billion-barrel Rumaila field near Basra — but all other foreign companies involved in bidding for a total of eight fields, including Royal Dutch Shell, rejected what were considered to be punitive terms on offer from the Iraqi Government. In total, nearly 30 overseas companies withdrew.
Hussain al-Shahristani, the Oil Minister, was forced to order a rerun of the auction for the other seven fields available.
The contracts were based on companies accepting a fixed fee per barrel of oil extracted from each of the fields above a minimum output target. A consortium led by ExxonMobil, the American group, originally outbid the BP/CNPC alliance for Rumaila, but it pulled out after rejecting the terms on offer for producing crude from the field, which is one of the biggest in the world.
The consortium’s withdrawal gave BP and CNPC a renewed opening, but the group was forced to accept a fee of only $2 per barrel of oil produced, nearly half the $3.99 figure in its initial offer.
Mr al-Shahristani said: “We asked each of the companies to accept and BP and CNPC accepted the ministry’s figure and for that reason their bid is accepted.”
Ruba Husari, an oil analyst, said: “Today we have seen that the Iraqi Oil Ministry and international oil companies are living on different planets.”
Last night the ministry, which is desperate to boost oil production from 2.3 million to four million barrels per day to support the country’s reconstruction, was considering renewed offers for the fields from the oil companies. It was unclear when further winners would be announced.
The televised auction coincided with the withdrawal of US troops from Iraq’s cities. At least 27 people were killed by a car bomb in the Kirkuk shortly after the auction ended.
The first auction for Iraqi oil in 30 years faltered as a succession of Chinese, American, Italian, British, Dutch and South Korean companies rejected the terms on offer. Conoco-Phillips, the American oil group, had proposed $26.70 per barrel to work in the Bai Hassan oilfield in the north of the country, but the Government offered only $4.
CNOOC and Sinopec, of China, wanted $25.40 per barrel produced from the Maysan field in southern Iraq, but the Government’s offer was $2.30 per barrel. No bids were submitted for the Mansouria gasfield in Diyala province, one of the most politically volatile regions in the country. Only one bid was submitted for the Bai Hassan and Kirkuk oilfields in the north and the Akkas and Missan fields in the west.
Alex Martinos, an energy analyst at Mirabaud, a Swiss bank, said: “Iraq has a very difficult risk profile and there are question marks over the political and security situation. These companies have been asking how tempting these contracts really are at $2 a barrel.” Iraq has the world’s thirdlargest reserves of crude, after Saudi Arabia and Iran, and the auction offered access to 43 billion of the 115 billion total of proven reserves.
International oil companies are eager to secure access to new reserves, but the service contracts on offer yesterday were far less attractive than the preferred “production sharing agreements” under which they gain an equity stake in the available fields.
Hussain al-Shahristani, the Oil Minister, was forced to order a rerun of the auction for the other seven fields available.
The contracts were based on companies accepting a fixed fee per barrel of oil extracted from each of the fields above a minimum output target. A consortium led by ExxonMobil, the American group, originally outbid the BP/CNPC alliance for Rumaila, but it pulled out after rejecting the terms on offer for producing crude from the field, which is one of the biggest in the world.
The consortium’s withdrawal gave BP and CNPC a renewed opening, but the group was forced to accept a fee of only $2 per barrel of oil produced, nearly half the $3.99 figure in its initial offer.
Mr al-Shahristani said: “We asked each of the companies to accept and BP and CNPC accepted the ministry’s figure and for that reason their bid is accepted.”
Ruba Husari, an oil analyst, said: “Today we have seen that the Iraqi Oil Ministry and international oil companies are living on different planets.”
Last night the ministry, which is desperate to boost oil production from 2.3 million to four million barrels per day to support the country’s reconstruction, was considering renewed offers for the fields from the oil companies. It was unclear when further winners would be announced.
The televised auction coincided with the withdrawal of US troops from Iraq’s cities. At least 27 people were killed by a car bomb in the Kirkuk shortly after the auction ended.
The first auction for Iraqi oil in 30 years faltered as a succession of Chinese, American, Italian, British, Dutch and South Korean companies rejected the terms on offer. Conoco-Phillips, the American oil group, had proposed $26.70 per barrel to work in the Bai Hassan oilfield in the north of the country, but the Government offered only $4.
CNOOC and Sinopec, of China, wanted $25.40 per barrel produced from the Maysan field in southern Iraq, but the Government’s offer was $2.30 per barrel. No bids were submitted for the Mansouria gasfield in Diyala province, one of the most politically volatile regions in the country. Only one bid was submitted for the Bai Hassan and Kirkuk oilfields in the north and the Akkas and Missan fields in the west.
Alex Martinos, an energy analyst at Mirabaud, a Swiss bank, said: “Iraq has a very difficult risk profile and there are question marks over the political and security situation. These companies have been asking how tempting these contracts really are at $2 a barrel.” Iraq has the world’s thirdlargest reserves of crude, after Saudi Arabia and Iran, and the auction offered access to 43 billion of the 115 billion total of proven reserves.
International oil companies are eager to secure access to new reserves, but the service contracts on offer yesterday were far less attractive than the preferred “production sharing agreements” under which they gain an equity stake in the available fields.
Source: The Times
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