Iraq Offers 2nd Round of Oil Bids

So the great Iraqi oil sell-off continues. The embattled Iraqi Oil Minister Hussain al-Shahristani will today unveil the next round of oil contracts at a conference in Istanbul.

Al-Shahristani is under pressure to pull in investment after the Iraqi government’s first round only secured one deal for the vast Rumaila field: BP and China National Petroleum Company. The other companies complained that the terms were too tough.

So in order to tempt big bids, among the more lucrative fields are the West Qurna-2 field, with nearly 14 billion barrels of estimated reserves, and the Majnoun field with 12 billion. That’s a lot of oil. Get your hands on one of those and it certainly would be “Mission Accomplished!” Oops – sorrry I forget – this was never a war about oil….

Contracts are expected to be structured as 20-year deals, in which companies agree to produce oil from the fields in exchange for a per-barrel fee. Although international oil companies normally prefer to take “ownership” of the oil, they cannot as Iraq’s  highly controversial Oil Law has not yet been passed.

So to entice other oil majors the Iraqi Oil Ministry has set a new, lower signature bonuses of $100 to $150 million per field adding up to a total of $1.2 billion to develop 10 oil fields listed. Iraq would take a 25 percent share in any field.

The amount of money iraq will earn is much less than was first offered during the first round, but al-Shahristani said the signature bonus had been reduced in order to encourage companies to take part.

The international oil majors – such as Shell, BP and Exxon will be stuck between a rock and a hard place. In current conditions, fields of 10 to 14 billion will be hugely tempting, but then the deteriorating security situation will be a real worry.

Maybe they should look to see what Libya is now offering??

I wouldn’t be surprised if there was a new bidding round there soon…