Iraq to Sweeten Terms for Gas Bidders

Wall Street Journal By HASSAN HAFIDH ISTANBUL—Iraq is set to sweeten contract terms for its third bidding round for its three prized natural gas fields, in an attempt to entice international companies to enter the auction, according to a company executive. Unlike oil deals for the first and second bidding rounds that were held last year, winning companies won't need to pay the Iraqi government signature bonuses for the three natural gas fields on offer, the company executive said on the sidelines of two-day roadshow held by the Iraqi oil ministry in Istanbul. International oil companies have been paying bonuses between $100 million and $500 million for deals they won in the first and second licensing auctions held last year. Iraq also apparently has delayed the bidding by a month, with it now scheduled to be held Oct. 1, an international oil company official said Sunday. Earlier this year, Iraq said it would hold the licensing auction on Sept. 1. Iraq's oil minister, Hussein al-Shahristani, said that one of the incentives for interested companies would be to allow them to export 50% of the produced natural gas from these fields. The Iraqi government will take or pay for half of the produced gas. However, for some companies the export term is a "negative condition," said another company official. Iraq hasn't the infrastructure to export gas from these fields, he said. So if half of the produced natural gas would be for exports, pipelines, reservoirs and gathering stations for exports would need to be built. Companies also need to look for customers for the Iraqi gas, he added. The three natural gas fields on offer are: Akkas field in Anbar province, which the oil ministry puts at 5.6 trillion-cubic feet of gas reserves; Mansouriya in Diyala with 4.5 trillion-cubic feet of reserves; and Siba, located in Basra province with 1.13 trillion-cubic-feet of reserves. Fifteen international companies have so far shown interest in taking part in the third bidding round, a senior Iraqi oil official said. Sabah Abdulkadhem al-Saaidi, head of the legal and commercial section at the oil ministry's petroleum contracts, also said that Aug. 20 would be the last date for companies to register for the natural gas bidding round. Despite huge gas reserves estimated at 112 trillion cubic feet—the fifth highest in the region, according to U.S. Energy Information Agency data—Iraq is producing 1.65 billion cubic feet a day of gas, some 700 million cubic feet a day of which is flared due to lack of infrastructure. The goal is to fuel turbines ordered for new power stations with gas instead of crude, and the fields on offer could start commercial production in one or two years, Iraqi officials say.