The Petroleum Contracts and Licensing Directorate, a section of the Iraqi Oil Ministry, has announced that the fourth round bidding process for 12 exploration blocs will be delayed from the 25-26 January to the 7-8 March 2012.
The Directorate cited planning and holidays as a key concern, with key deliberations slated over the religious holiday of Eid al-Adha.
However, the timings of Eid were known at the time the January round was announced, and oil companies pre-approved to bid are known to have reservations about the draft contract. Iraq Oil Report reported that several questions levelled at ministry figures by pre-approved company executives at a the unveiling of the draft contract in Ammam last month, went unanswered.
At the heart of bidders’ concerns is the underlying structure of the contracts. In keeping with previous rounds, the contracts on offer are technical service contracts offering remuneration on a fee-per-barrel basis after targeted production is reached, subject to payments for development expenses.
While suited to established supergiant fields such as Rumaila and West Qurna, potential operators are concerned that the contract as drafted does not adequately account for the exploration and production risk at the blocs up for auction, about which much actionable data is available.
Elsewhere, production sharing agreements of the type used in Iraqi Kurdistan have been used for fields of this type in order to balance risk and reward, but such contracts are deemed unconstitutional by Baghdad, which will not allow foreign companies to take proprietary interests of Iraqi oil. The delay may give the Oil Ministry more time to work on the draft.
