Oil companies lobby Baghdad over future licensing round

20 March 2008
Major oil companies have demanded changes to Iraq's first oil bid round since the US invasion, after it emerged that Baghdad is prioritising the development of existing fields on a service-only basis.

International oil companies (IOCs) expected the forthcoming bid round to include undeveloped fields with the potential to agree lucrative production-sharing contracts or joint ventures.

Instead, the first round will focus on the development of existing fields, including South Rumeila and North Rumeila, West Qurna, Zubair, Missan, Kirkuk and the western Akkas gas field.

Baghdad has indicated to oil companies that any development of existing fields will be carried out on a service contract basis and that the Iraqi National Oil Company (INOC), yet to be created, will take full ownership.

The oil companies are now locked in talks with ministry officials in an attempt to agree more favourable deals for existing fields, according to an executive from one leading company.

“The new undeveloped fields are what most of the companies are looking at for the long-term,” says the executive. “A simple service contract for old fields does not fit in with the normal business model most majors have. There is some concern that we are being pushed too far away from our original business plan for being here.”

Oil majors, including the UK's BP, France's Total, the UK/Dutch Shell Group along with Chevron and ExxonMobil Corporation of the US, met Iraqi oil officials in Jordan in mid-March with further negotiations scheduled for later in the month.

An adviser to the Oil Ministry says temporary technical support contracts are likely to be signed by the middle of this year, several months later than planned. “It is important we get the structure right for these deals from the start so there are no problems later,” he says.

Oil Minister Hussain al-Shahristani told MEED last month that two licensing rounds covering existing fields and three further large fields will result in the state's oil production soaring to 6 million barrels a day (b/d) by 2013, from its current 2.4 million b/d.

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