17 July 2008
Iraq is gearing up to conduct a road show for its first bid round since the US-led invasion of 2003, announced at the end of June, and expects to launch a second round before the end of the year, Oil Minister Hussein al-Shahristani told International Oil Daily in an interview in Baghdad Wednesday.
He added that technical support contracts (TSC) for five producing fields could still be signed with six international majors if they do not overlap with the new contract awards.
The plan is to present data on the eight oil and gas fields up for grabs in the first bid round in London at the end of September.
The oil ministry in June signed a contract with consultant Gaffney Cline and Associates to help package the data for the eight fields, some of which will be made available to bidders online. The consultant will also help finalize the model Producing Field Technical Service Contract that will be used for the 20-year deals.
“Once the data packages are out, we will start focusing on a second and third round which could include discovered but nondeveloped fields, exploration blocks as well as some producing fields,” al-Shahristani said.
International oil companies will have six months from the receipt of tender protocols and data to submit bids, and the ministry has laid out an ambitious timetable that involves contract awards by June 2009.
“I agree it is ambitious, but we are talking about producing fields where production and other data are already available and most companies have enough information, so one year is enough,” al-Shahristani said.
“Iraq lost big investment opportunities in the last five years as a result of the security situation and political differences, so now we aim to complete this round within a year.”
Iraq prequalified 35 companies to participate in the bid round and added six more national companies that it said could participate in consortiums but not bid alone.
“The six companies did not fulfill all the criteria, especially the financial ones. But because they are backed financially by their own governments, we told them, especially the Turks, that they can enter into joint ventures with others for those fields,” al-Shahristani said.
“Some companies will be qualified to bid alone in the next rounds where their own production is above the production of the fields on offer.”
Al-Shahristani said companies that prequalified for the first bid round, which include all the majors, may be split into groups — companies that are competing for gas fields only, companies that can bid for all fields in consortiums, and companies that can bid individually for a maximum of three fields.
Separately, ministry officials told International Oil Daily that the firms may be divided into three categories. One category could bid for all oil and gas fields, another for all fields except Kirkuk — a complex field because of its fractured reservoir and sour gas — and a third only as part of a group.
The eight first-round fields are the Kirkuk and Bai Hassan oil fields in the north; the Rumaila, Zubair, West Qurna (Phase 1) and three Missan oil fields — Buzurgan, Fauqa and Abu Ghirab — in the south; and the Akkas gas field in western Iraq and the Mansouria gas field in the east.
Companies that win contracts will be expected to submit development plans within six months of getting government approval and to boost production capacity to defined targets within the first three years, or by the start of 2013.
The target increases are 200,000 barrels per day for Kirkuk, 100,000 b/d for Bai Hassan, 800,000 b/d for Rumaila north and south, 250,000 b/d for Zubair, 150,000 b/d for West Qurna and 150,000 b/d for the Missan fields.
Right now, the six fields are together producing some 2.1 million b/d. Iraq’s five-year plan aims to lift national production capacity to 4.5 million b/d by 2013 from 2.5 million b/d currently and to 6 million b/d within 10 years.
In a second phase, running for three years, companies would be expected to introduce enhanced oil recovery, which Iraqi officials say might be needed to achieve the target increases in some fields.
Al-Shahristani said TSCs for the five big producing fields negotiated by majors over the past nine months have lost some of their relevance because they risk overlapping with the bid round awards. But he said they can still be signed if the companies submit new proposals for one-year TSCs, rather than the original two years, in time.
“There has to be a clause in [the TSCs] that states they automatically become void once the field development contracts are awarded. We will sign any contract that is submitted to us as long as there’s no overlap with the new contracts, but so far we have received none,” he said.
The Iraqi minister said critics of the no-bid TSCs, especially in the US, are using Iraq’s desperate need for help for electoral purposes. Critics claim the proposed deals prove the Iraq war was largely about oil, and that contracts are being used to reward companies from countries who helped topple Saddam Hussein.
“We have announced the first public and transparent licensing round in the history of Iraq, but it’s normal that we make a direct call for companies to offer support to Iraqi companies in procuring equipment which will be deployed and operated by us,” he said.
He said the same thing applies to ongoing gas negotiations with Royal Dutch Shell. The two sides are discussing the establishment of a joint venture with South Gas Co. to gather and process associated gas now flared in southern Iraq and sell it to Iraqi power and industrial facilities and export the excess.
“There are no biddable parameters for this project,” he said. “A third party will do the valuation of the Iraqi assets in the joint venture which will buy the raw gas and sell the processed gas according to international prices. No biddable parameters apply to any part of this scheme.”
By Ruba Husari, Baghdad
(Published in International Oil Daily July 17, 2008)