Baghdad: Iraq is putting 12 oil and gas exploration blocks up for sale at a two-day auction that opened yesterday, which it hopes will boost its reserves and strengthen its position as a key producer.
The sale, the fourth such auction to be organised by Iraq since mid-2009, comes as the country ramps up its oil exports, which account for the vast majority of government income, and looks to raise gas production to increase woefully inadequate electricity output.
But unlike the three previous sales, which offered contracts to foreign energy firms to raise output at existing oil and gas fields, Iraq will this time be showcasing areas earmarked for exploration.
"This competition is transparent and public," Oil Minister Abdul Karim Al Luaybi said in remarks to open the auction.
"Many qualified companies will participate. The round is considered very important for the ministry and the country to develop and improve the economy."
A consortium led by Kuwait Energy that also includes Turkey's TPAO and Dubai-based Dragon Oil won a 900-square-kilometre oil exploration block in the southern province of Basra, for a service fee of $6.24 per barrel of oil.
The companies must pay a $25 million signing bonus, while their minimum expenditure is set at $90 million. Two gas exploration blocks did not garner any bids, but are to be presented again on today morning.
The exploration blocks include seven which are thought to hold gas and five that are believed to hold oil. In all, 47 companies have pre-qualified to bid.
The bidding has a gameshow-like quality, with the deadline for bids and a clock with red digits showing the current time projected on massive screens at the front of an auditorium, along with information about the block that is up for grabs.
Bids are placed in a clear box next to top Iraqi oil officials who are seated on a stage at the front of the auditorium, then removed and reviewed.
All companies are required to publicly reveal their offers for each exploration block they bid for, and the oil ministry is obliged to accept the lowest-price offer, regardless of the company or consortium that submits it, so long as it is below a preset maximum agreed by the ministry.
As in previous auctions, Iraq requires foreign firms that agree to explore the blocks to work under fixed-price service contracts, rather than production-sharing agreements that are common elsewhere and more popular with major international energy firms.
Baghdad is also now mandating that firms that win contracts agree not to sign deals with the autonomous Kurdish region, or any other sub-national authority, without the central government's approval, according to the head of the oil ministry's petroleum contracts and licensing department.
