The second and final day of Iraq’s fourth oil and gas auction is over, with just two of the blocks on offer awarded.
Again, the stiff commercial terms on offer seem to have been the biggest turn off. No western majors bid over the whole weekend, and the country’s Oil Minister had to look on as representatives from Shell, Total and other coveted oil firms were content to watch lesser-fancied firms bid for the blocks on offer.
Russia’s Lukoil snapped up block 10, perhaps the prize oil concession on offer, taking operatorship and a 60% stake in the oil field with a low bid of $5.99 per barrel of oil equivalent produced.
Block 10 lies in well served areas with access to infrastructure, and close by to known fields. Inpex took the remaining 40% interest.
Lukoil fended off higher bids from Kuwait Energy and Dragon Oil, which had also bid together to win block 9 yesterday, and a consortium of PetroVietnam, Bashneft and Premier Oil. The Russian oil giant will hand over a $25 million signing bonus to the Oil Ministry and is committed to spending $100 million at the block.
Pakistan Petroleum, which was not one of the more fancied bidders before the auction began, won block 8 with a lone low bid of $5.38 per barrel of oil equivalent produced, thought to be some way below what the Oil Ministry was willing to pay. Japex (80%) and Itochu (20%) lost out with a bid of $10.57. The firm is committed to a $15 million signing bonus and $100 million of investment in the exploring the field.
Block 8 is an oil-heavy field, which lies north east of Baghdad in central Iraq, and runs to around 6,000 km2.
Blocks 3,4,5 and 7 received no bids, and blocks left over from yesterday received no new interest. Of the twelve blocks, eight received no bids at all.
The Oil Ministry will be particularly disappointed in the lack of interest for gas fields. Blocks 3,4 and 5 today attracted no bids, despite been situated next to large known gas deposits such as the Akkas formation, and offering much greater security than blocks 1 and 2.
Oil Minister Abdul Kareem Al Luaibi closed the auction by announcing there will be a fifth bidding round. The terms on offer will almost certainly have to change before then – especially for gas exploration – if Luaibi is to avoid a repeat of the disappointing spectacle of the last two days.
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