Iraq Revises Model Contract for International Oil Cos

AMMAN (Dow Jones Newswires), Mar. 24, 2009

The Iraqi Oil Ministry has sent out a revised copy of a model contract for the eight oil and gas fields included in its landmark first bidding round in an effort to accelerate the process of awarding contracts to international oil firms by the end of June, a senior Iraqi oil official said Monday.

"We had sent out to bidding companies on March 19 a semifinal version of the model contract," Abdul Mahdy al-Ameedi, deputy director general at Iraq's Petroleum Contracts and Licensing Directorate, or PCDL, told Dow Jones Newswires by telephone from Baghdad.

International oil companies have to send their comments on the new model contract by April 1, and the PCLD will issue its final model servicing contract and resend it to them between April 15 and April 17, he said.

"Companies would have two and half months to study the final model contract and submit their offers by the end of June this year," he said, adding that contracts would be awarded by the end of June.

The PCLD has made several changes to the original model contract which was first issued in November last year, Ameedi said.

The most important change the directorate had made to the original model contract was that oil firms would have a 75% stake in the joint ventures with state-owned Iraqi operators at the fields holding the rest, he said. That was up from 49-51% equity stake initially proposed.

The Iraqi oil ministry is planning to award service contracts which mean that winning companies would receive remuneration in kind for each produced barrel as well as cost fees. Big oil companies prefer deals that give them a share of profits and allow them to book reserves.

The initial model contract stated firms should bid on the cost per barrel of maintaining the same output over 20 years, and the cost per barrel of raising output. Oil companies would recover their costs from oil they pump above the baseline.

The producing oil fields in question 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 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  

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