Iraq Ups Oil Bid Round Signature Bonuses To $2.6B
AMMAN (Dow Jones Newswires), Apr. 28, 2009
The Iraqi Oil Ministry has dramatically increased to $2.6 billion the signature bonuses international oil companies must pay the Iraqi government under contracts for the six oil and two gas fields to be concluded in the country's first bidding round, according to a final tender document.
The Final Tender Protocol, or FTP, issued by the ministry and a copy of which was obtained by Dow Jones Newswires Tuesday, shows the bonuses range from $200 million each for Akkas and Mansouriya gas fields to $500 million for the super giant Rumaila oil field. The bonuses for Kirkuk and West Qurna phase 1 oil fields are $400 million each, and Zubair, Missan and Bai Hassan oil fields are $300 million each.
A previous draft of the tender protocol suggests that companies would pay signature bonuses ranging from $10 million to $55 million for each field based on the crude oil and gas output up to 100,000 barrels a day or the equivalent, and $50 a barrel for every additional produced barrel.
An Iraqi oil official, familiar with the FTP, said signature bonuses were increased substantially to provide more money to the ministry which lacks cash to develop the country's oil industry hard hit by war, sanctions and lack of investment.
The $2.6 billion signature bonuses would be paid back to companies at specified interest rate and timescale. It is more of a cash loan to the Iraqi oil ministry, an oil expert who works closely with oil ministry said.
The document also obliged winning companies to spend at least $1.550 billion to develop these fields. It defined in a table the minimum amount of money that companies need to spend on each of the announced fields.
The winning companies should spend a minimum of $300 million to upgrade Rumaila oil field, $250 million for West Qurna phase 1, $200 million for each of Zubair and Missan and Kirkuk, $150 million for each of Bai Hassan oil field and Akkas gas field, and $100 million for Mansouriya gas field.
The FTP and model contracts were sent to international oil companies on Thursday after the ministry made some changes to previous ones, said a covering note attached to the documents signed by director general at the ministry's Petroleum Contracts and Licensing Directorate, Natiq al-Bayati.
Companies should pay the signature bonuses with interest over five years. Payments start two years from the date that the contracts become effective, which is scheduled to be August this year.
The document also obliged companies to increase production at the six oil fields by a minimum of 1.6 million barrels a day and set the minimum plateau for each field at their current level. Current output from these oil fields stood at 2.176 million barrels a day which is roughly what Iraq is currently producing.
For the two non-producing gas fields, it obliged winning companies to produce a minimum plateau of 400 million cubic feet a day for Akkaz field and 300 million cubic feet a day for Mansouriya field.
A bidding and award session will be held in Baghdad June 29 and 30, when international companies will submit their offers and the ministry will award the eight contracts, the FTP states.
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