Iraq Invites IOCs to Workshop on Oil Deals

AMMAN (Dow Jones Newswires), Jan. 15, 2009

The Iraqi oil ministry will hold a workshop in Istanbul on Feb. 12-14 for international oil companies interested in bidding for the country's first licensing round to develop one of the world's largest oil and gas fields, an Iraqi oil official said Thursday.

"The ministry will listen to proposals, comments and suggestions from oil companies on the bidding procedures and contract models of the first licensing round," said the official who is close to the first bidding round.

The ministry will study these proposals and comments and if it finds them useful it will adopt them, he said.

Iraq announced its first licensing round at the end of June, offering eight oil and gas fields to 35 prequalified international companies, including the world's majors.

The official said only companies which paid participation fees and bought a draft model contract, initial tender protocols and data for the eight oil and gas fields can attend the workshop.

So far only 16 international oil companies out of the 35 prequalified firms had bought these documents, but mostly the world's majors, the official said.

He said the draft contract model which offers oil-producing fields on service contracts could be modified in accordance with the outcome of the workshop and would be sent again to companies which bought the first draft contract.

Analysis of the latest text of the model contract reveals there was still a gap between the oil ministry and international oil companies on the draft model contract. The gap has been widened by the recent slide on world oil prices.

"Investing in an environment like Iraq isn't very tempting for international oil companies because of the recent dramatic slide in oil prices," an Iraqi analyst said.

The workshop aims to narrow the gap between the oil ministry and companies and for the ministry to issue the final technical service contract by April and award contracts by the summer.

The producing oil fields in questions are Kirkuk and Bai Hassan in northern Iraq, West Qurna -1, North and South Rumaila, Zubair and Missan in southern Iraq. The two non-producing gas fields are Akkas in western Iraq and Mansouriya in the center.

Baghdad hopes contracts for the fields, which are expected to run for 20 years, will help boost the country's crude production capacity to 4.5 million barrels a day by 2012 from 2.4 million barrels a day now.

Iraq also launched last month the second bidding round opening some 15 oil fields and 1 gas field for international investment.

Around two-thirds of the 35 companies that have been "prequalified" to place bids for the first bidding round are international firms like Total SA (TOT), Exxon Mobil Corp. (XOM), Lukoil Holding (LKOH.RU), Royal Dutch Shell PLC (RDSB), BP PLC (BP) and Chevron Corp. (CVX).

However, some international companies are still reluctant to go to Iraq to develop the country's vast oil reserves, the world's third largest, because of violence and unstable security situation.

Iraq is planning to hold provincial elections at the end of this month, which could trigger violence.  

Copyright (c) 2008 Dow Jones & Company, Inc.

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