Economy
Iraq Delays Major Oil Auction After Amending Contract Terms

Iraq Delays Major Oil Auction After Amending Contract Terms


Iraq has pushed back this month’s auction to award the rights to develop 11 oil and gas fields to international companies with ten days, after it amended some of the contract terms, Bloomberg reported on Thursday, citing people familiar with the process.

 

Originally, the oil auction was scheduled to be held on April 15, but one of Bloomberg’s sources said that the Iraqi Oil Ministry had rescheduled the auction for April 25 after introducing some changes, to give companies more time to study the new terms of the contract.

 

Under the original schedule, most—if not all—interested bidders would have had just two days to evaluate the new terms before the auction, Luay Al Khatteeb, executive director of Baghdad-based research organization Iraq Energy Institute, told Bloomberg.

 

As many as 16 companies—including Big Oil’s Exxon, Chevron, and Total—have expressed interest in taking part in Iraq’s bidding round. The other interested bidders are Eni, Lukoil, Gazprom, Zarubezhneft, Petroliam Nasional Bhd, Oil & Natural Gas Corp, CNOOC, Geo-Jade Petroleum Corp, China ZhenHua Oil Co, United Energy Group Ltd, Dana Gas, Crescent Petroleum, and Dragon Oil Plc, according to a document by the Iraqi Oil Ministry. The oil and gas field development plans include three blocks along Iraq’s border with Kuwait, seven blocks at the Iraq-Iran border, and one offshore block in the Iraqi waters in the Persian Gulf, Iraq’s Oil Ministry’s spokesman Asim Jihad told Bloomberg at the end of last month.

 

Jihad told Bloomberg today that he was not aware of any delay of the April 15 auction date.

 

All companies will be interested, but they will have to check first if the contract terms are favorable, Iraq Energy Institute’s Khatteeb told Bloomberg.

 

Related: Shell To Shift From Oil ‘When This Makes Commercial Sense’

 

According to Ian Thom, principal analyst for Middle East upstream at Wood Mackenzie, the basin in Iraq “is world-class and is the most prospective across the Middle East.”

 

“For companies that are thinking about building a business that’s resilient, having low-cost resources is a good place to start,” Thom told Bloomberg.

 

Earlier this month, OPEC’s second-largest producer Iraq approved an increase in its crude oil production capacity to as much as 6.5 million bpd by 2022. This compares to a current production capacity of below 5 million barrels and production rates—as reported by the local energy ministry—of around 4.4 million bpd.