Monday, August 24, 2009

Iraq Showcases Oil Fields for Next Slate of Auctions

By CHIP CUMMINS and HASSAN HAFIDH Iraqi officials, smarting from a disappointing oil-license auction in June, will showcase a second set of fields this week that they hope will garner more interest from international companies. Oil executives have wanted to enter Iraq's giant and relatively unexplored fields since the U.S.-led invasion in 2003, but they mostly passed on the first opportunity earlier this summer. View Full Image European Pressphoto Agency Iraq plans a second round of oil-field auctions after a disappointing first round. Above, a worker at a Baiji oil refinery, north of Baghdad, on Sunday. In late June, Iraqi officials attempted to auction rights to boost output at a number of fields that were already producing. Oil companies complained the terms Iraq's oil ministry demanded were too tough. Only one field was awarded, to a consortium headed by BP PLC and China National Petroleum Co. This time, Iraqi officials are dangling the opportunity to work in undeveloped fields, a potentially more attractive offer. Iraqi officials said Sunday that 45 companies have prequalified to bid on the contracts. Iraqi Oil Minister Hussain al-Shahristani and other top oil officials plan to meet executives on Tuesday in Istanbul, for a road show of the fields expected to be part of the auction. Iraqi officials have prepared presentations on the fields and are expected to meet prospective bidders. Mr. Shahristani plans to hold a news conference in Istanbul after the event. 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. Those aren't typically attractive terms for international oil companies, which generally prefer to take ownership of some of the oil they produce. But Iraq's parliament still hasn't passed a petroleum law that would establish the legal groundwork for such deals. In the next auctions, which the oil ministry said will take place before the end of the year, Baghdad is offering a number of potentially giant, untapped fields. A new challenge has emerged for Iraqi oil officials: convincing executives that security has improved, despite a spate of recent bombings, including attacks in Baghdad that left more than 100 dead last week. "The security issue was a major factor in why we demanded a higher compensation threshold for our work" in the first round, said an executive from a large international oil company. "And the ministry was deaf to this." Iraqi officials said Sunday that in addition to providing details of the 10 new groups of fields on offer at their Istanbul road show, they may also shed light on what they plan to do with the fields that weren't awarded in June.

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