As controversy rages between Baghdad and Erbil over the status of ExxonMobil’s activities in the semi autonomous Kurdish region, the Iraq Oil Ministry is pressing ahead with the fourth bidding round for exploration blocks in the south.
The fourth round of auctions is the first that will see the Iraqi government award contracts for exploration as well as field development of both oil and gas assets. The government expects the 12 blocks on offer to increase Iraq’s reserves by 10 billion barrels of oil and 29 billion cubic metres of gas.
A lookahead to the fourth round and a map detailing the 12 blocks on offer can be found on pages 8-12 of Oil & Gas Middle East’s Iraq Supplement.
On Friday the ministry announced that the consultation period regarding the model contract had closed, and that the final form of the contract would be issued to approved bidders on 20 April.
To date 36 of the 46 companies approved by the oil ministry are still in the hunt, after Russian firm Lukoil said it will not bid on fields, according to an Interfax report on Wednesday.
The fourth bidding round has been delayed several times after a deluge of complaints and amendments to the initial draft contract overwhelmed ministry officials. According to Iraq oil sector analyst Ruba Husari, over 600 pages of suggested contractual amendments were submitted by international oil companies.
In response the Oil Ministry has made several important changes to its standard form contract, in an effort to replicate the ‘shared success’ element of a production sharing agreement with the political constraints which militate against offering proprietary interests in newly discovered Iraqi oil.
No national oil company will take a stake in the contracts, in contrast the to a provision in the first three rounds where a branch of the state oil company took a 25% interest in fees paid.
Deemed prices for gas and condensates produced are higher, leading to improved revenues per barrel produced.
Foreign companies may still be faced with up to seven years of government-mandated delay between discovering oil and entering production, as the government will seek to manage the rate at which new production capacity comes online.
Now, in addition to exploration costs bearing an interest at the interbank LIBOR rate plus 5% during any holding period, Iraq will also pay oil companies further interest of LIBOR plus 3% on costs related to work undertaken on behalf of the government such as infrastructure.
The oil ministry hopes that this last provision will incentivise companies to develop fields in anticipation of entering production, instead of sitting on their hands until oil is needed.
The bidding round is slated for 20-31 May.
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