ACTION SLOW AT IRAQ OIL AUCTION

Few Bidders to Develop Iraqi Oil and Gas Fields
Timothy Williams (w/Campbell Robertson, Alissa J. Rubin, Abeer Mohammed and Keith Bradsher), June 30, 2009 (NY Times)

"The Iraqi government stumbled once again… in its frequently delayed effort to award development rights to its most valuable oil fields…[A public auction] largely failed to attract the lucrative offers it sought from dozens of international oil companies invited to the bidding.

"After the daylong event [held in a heavily secured ballroom at the Rashid Hotel in Baghdad’s Green Zone], which was broadcast live on national television [to combat allegations of widespread corruption], the government came away with just a single deal struck from among the six giant oil fields and two gas fields it had put up for bid."

The Rumaila fields are the far south, near Basra. (click to enlarge)

"The single successful contract [pending further negotiations] went to a joint venture of BP and the China National Petroleum Corporation for the largest field offered: Rumaila, near the southern city of Basra, which has proven reserves of more than 17 billion barrels. [Now producing a million barrels of oil a day, the government says Rumaila should produce 1.75 million barrels and the oil companies say they can get 2.85 million barrels]…

"The auction, celebrated by the Iraqi government as a milestone for the fledgling democracy, came on the same day as the deadline for American combat troops to pull out of Iraqi cities.

"It is the most significant attempt to open up the country’s oil industry since it was nationalized by Saddam Hussein in 1972, and the centerpiece of a plan to raise oil production to 6 million barrels a day by 2015, from the current level of 2.4 million [but the country lacks the money to rebuild the industry that accounts for almost all of its foreign earnings]...[Iraq owns 9% of the world’s crude oil, the world's third largest oil reserves after Saudi Arabia and Iran, but its pipelines and other infrastructure are aged and decaying]..."

click to enlarge

"Instead of garnering an infusion of foreign cash [from attendees such as Exxon Mobil, Lukoil, Japex, Royal Dutch Shell, Total, the Korea Gas Corporation and others] to rebuild and to prop up its limping economy, however, the auction of fields that contain about 80 percent of Iraq’s oil output appeared to further polarize the country. Four of the eight oil and gas fields…received only a single bid from oil corporations, and an undeveloped gas field in violence-plagued Diyala Province in northwest Iraq received none…

"…[O]bservers said the event could be deemed a success only if viewed strictly in populist political terms, because foreign presence in Iraq’s oil industry is a contentious issue. Many believe the 2003 American-led invasion was carried out to wrest away Iraq’s enormous oil reserves...Ruba Husari, editor of the Iraq Oil Forum,…said what remained unresolved was how Iraq was to modernize its oil industry without giving in to the desires of oil companies, which prefer owning a share of the oil they pump. Iraq has so far rejected such arrangements, which are known as production sharing agreements."