The Iraq licensing directorate’s fourth bidding round has been delayed for the fourth time over continuing concerns with the contractual model first shown to bidders in early September.
The fourth bidding round, when 12 new gas and oil exploration blocks are due to be auctioned to international energy firms, has now been put back to the end of May.
“The oil ministry has decided to delay the fourth bidding round until May 30-31 to give more time for the interested companies to study the new amended contract,” Abdul-Mahdy al-Ameedi, director of the oil ministry contracts and licensing directorate, told Reuters. However, another government oil official suggested the form of the contract was not yet settled.
“The reason behind this new date is because we are still discussing with international companies a proposed model contract for the bid round,” Sabah al-Saadi, deputy director of the oil ministry’s Petroleum Contracts and Licensing Directorate, told Dow Jones Newswires.
Without giving details, al-Saadi told Dow Jones that his office would make some slight changes to the model contract that “will be of interest for both the ministry and companies.”Â
After the last delay, announced on 4 January, the Oil Ministry announced that revised and final contracts would be issued at the end of March. No new issue date has yet been given.
The auction is the first opportunity for foreign oil companies to explore on Iraqi soil for three decades. While the exact potential of the blocks is unknown due to outdated data available, the Oil Ministry hopes to add 29 trillion cubic feet of gas and 10 billion barrels of oil to Iraqi reserves once the blocks are developed.
The industry’s enthusiasm for the blocks is tempered by the adverse conditions in Iraq and a contractual model which – as with earlier rounds – seeks to give foreign oil companies a fee-per-barrel produced over a minimum threshold, instead of the prospect of profit oil. The first draft contract also had a tight recovery mechanism for oilfield services and other contractor costs deemed unreasonable.
According to Iraq oil analyst Ruba Husari of Iraq Oil Forum, citing private conversations with oil ministry officials, 600 pages of amendments and comments to the initial fourth round contract were submitted to Iraq’s licensing directorate.  Husari broke the story via Twitter.
Oil Ministry officials are torn between the commercial need to offering practical and attractive terms to the large independents and International Oil Companies required to boost Iraq’s production in a difficult operating environment and the Iraqi constitution as interpreted by Deputy Prime Minister for Energy Hussain Al-Sharistani, which according to Sharistani makes profit oil for foreign companies illegal.
The initial contract was enough for nine companies to withdraw further interest, with the Oil Ministry confirming that 37 of the 46 approved bidders purchased bid information after the initial meeting. To date none of the firms approved to bid have declared themselves firmly in or out.
Story updated 09:35 31/01/12 to add Al-Ameedi quote.
