If you are trying to figure out who won and who lost in Iraq’s first bid round, consider this:
- 22 companies have participated in the licensing round making offers for six oil fields and one gas field, as leaders or members of consortia. One gas field, Mansuriya had no takers.
- China’s CNPC was the most aggressive taking part in 5 offerings followed by Malaysia’s Petronas which targeted 4. Oil majors Exxon Mobil and Royal Dutch Shell aimed for 3 each, and so did Turkey’s TPAO and China’s Sinopec. BP, ConocoPhillips as well as China’s CNOOC and Korea’s Kogas targeted 2 each. The remaining 12 companies participated in bids for one field each.
- The Lowest remuneration fee bid for an oil field was $2.6/bbl offered by a consortium led by CNPC for West Qurna and the highest for an oil field was $26.7/bbl made by the ConocoPhillips-led consortium for Bai Hassan. The Akkas gas field drew a remuneration fee bid of a staggering $38/Boe from a consortium led by Italy’s Edison.
- The highest maximum remuneration fee offered by the Iraqi oil ministry for an oil field was $4/bbl for Bai Hassan while it offered $8.5bBoe for Akkas gas field.
- A group of BP and partner CNPC agreed to the ministry’s $2/bbl maximum remuneration fee it offered for the Rumaila field but their profit will be subject to a 35% corporate tax and will be cut by a further 25% to pay their Iraqi partner’s share. The Iraqi partner’s share of the investment is carried by the consortium as well.
And one more:
- Had the oil ministry accepted the offer made by the highest scoring consortia for all of the 6 oil fields, it would be, in theory, producing 8.2 million b/d when all 6 reach their plateau in six years according to the plateau production target bids.
My conclusion? There’s only one winner, but it’s not the Iraqi oil sector nor the international oil companies.
Baghdad – July 1st, 2009
Results of the First Licensing Round announced in Baghdad June 30, 2009 (You need to login to view this file)
I was actually impressed by the organization and the amount of transparency displayed during the event. It was very well organized. I hope the implementation of the BP-CNPC offer/contract will be directed solely in the interest of the country and the Iraqi people. I look forward to the second bid round and I hope we will see the IOCs revising their offers for the fields tendered in the first bid round and the process yields good results for all, especially in helping Iraq’s oil industry overcome the prevailing problems and boost the country’s production.
I liked the way Ruba made her concluding note about the winner? If it is neither Iraq nor the IOCs, who is it then? She left it to our imagination so will I..
A question: Isn’t it odd that a company like BP would immediately respond to MoO request to slash its offering by half? Going down from $3.9 to $2.O? It seemed that the representatives of BP were instructed to accept any price?
Some say it was because of the Chinese presence which I doubt since their share is said to be no more than 17% !
How come that the Chinese did not accept to go down from $2.6 t0 $1.9 for West Qurna? It is by far a lesser reduction!
May be the days ahead will shed more light on what happened and also on the prospects of such a deal be put to the test or not.
Issam Al-Chalabi
The criticism of the first round by many experts apparently paid off with most oil companies aiming at unreasonably high rates while the ministry offered very low rates .The gap between the offers on one side and with the ministry’s max fee is so big that it makes one wonder whether there were any previous negotiations or talks between the ministry and others. While the round appeared to reflect lack of determination on both sides; the ministry and oil companies, it is still to be seen whether the BP alliance could actually perform and produce results along the lines of the present understanding. What really worries me is the fact that the non- encouraging results of the first round could have a serious negative impact on the second round of tenders. The ministry will have to review its position very carefully if it intends to make the second bid round more successful.
In reply to Mr.Issam Al-Chalabi,I would like to reiterate my comment in previous communication to the Oil expert in Amman that the winner is H.Al Shahristani(Iraq Oil Minister)was the only winner from the activity? He placated his opponents and showed that he is not selling Iraqi oil on the cheap, he got a commitment to raise production by an incremental 1.9 mb/d instead of the 1.5 mb/d he was asking for from all 6 fields; and he does this things openly not behind closed doors like the KRG contracts.
Also a correction for the Chines share in the consortium is 33% and not 17% plus the fact that the chinese are already working in Ahdeb field in the south and that is a agood factor,in addition BP are the founder of Rumaila field since the 1950’S and they done a lot of reservoir work since the 2003 war, and they should know better.It is only natural that oil companies will try very hard to maximize their profit if they can, but depend on how good the other party to reflect what they see fit for the resonable cost.West Qurna oil field is more complicated than other fields….and that is the reason Oil companies could not go down on their cost!.