Mon, Jul 06, 2009 - Page 11 News List

Iraq expects more from auction

NEW OPPORTUNITY: Despite Iraq’s first oil auction proving somewhat disappointing, it may have proved a turning point for China, whose firms played a prominent role


The Iraqi government is hoping that a second major auction of oil and gas fields later this year will help revive a struggling oil industry where a first auction last week fell short, a government spokesman said.

“We think that the first [bidding] round didn’t achieve the full objectives of the Ministry of Oil,” government spokesman Ali al-Dabbagh said on Saturday.

“At the same time, it was a good achievement especially in [the] Rumaila oilfield ... With that level of production, we have compensated for the less[er] achievement of the first round. Generally we are happy with what we achieved,” he said.

The auction last Tuesday, Iraq’s first major competitive energy tender in decades and one of the biggest in history, stunned industry insiders when a wide gap between the government and oil majors over payment terms resulted in the sale of just one of eight fields put on the block.

Oil Minister Hussain al-Shahristani brushed aside criticism that it was a flop, saying the deal reached with a BP-led group for the country’s largest explored oilfield, Rumaila, would on its own provide a bigger production boost than they had been hoping for.

While plans to quickly increase output from 2.4 million barrels per day were dealt a blow, the government’s rejection of more pricey deals may play well among critics who oppose anything that could be seen as selling off Iraq’s prized asset cheaply.

“The Iraqi government is careful not to waste oil wealth, but at the same time there is a balance between this point and Iraq’s needs to develop the oil industry,” Dabbagh said in a meeting with reporters.

After the auction, Iraq said it would move up the date for the second round of tenders, expected to be more lucrative because the 11 fields to be offered are still undeveloped and could double current production.

“The Iraqi government and Oil Ministry is trying to make use of the results of the first round so that the second round would be more effective,” he said, adding that a panel had been established to learn lessons from the first tender.

No decision has been made on the fields that were not awarded to foreign firms last week, Dabbagh said.

The government has said the fields may be included in the second bidding round, put out for bids again separately or perhaps developed by Iraq on its own once a new National Oil Co is formed.

Dabbagh said the auction marked a turning point for China, eager to get a crack at the world’s third-biggest oil reserves no matter the cost. Chinese firms were included in groups competing for all seven oil and gas fields that received bids.

“China is decisive about entering this sector ... even if not making profit ... This opportunity for them in Iraq will never [occur] again in any place in the world,” he said.

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