Iraq strikes deals with Big Oil on southern fieldsIraqstruck deals with consortiums led by Shell and CNPC over massivesouthern oil fields on Friday, as part of a two-day auction that seeksto dramatically boost the country's crude output.
The successfulbids from the Anglo-Dutch and Chinese giants kicked off the sale, whichaims to catapult Iraq towards the top of the list of the world's oilproducers and bring in much-needed revenue to rebuild the country.
IraqiPrime Minister Nuri al-Maliki highlighted the transparency with whichthe auction was being conducted, contrasting it with the "darkenedrooms" in which now-executed dictator Saddam Hussein made deals overoil.
The contract for the enormous Majnoon field was jointly wonby Shell and its Malaysian partner Petronas, while CNPC led a groupcomprised of Petronas and France's Total to capture Halfaya.
"The second round represents a new era in the history of the Iraqi oil industry," Maliki said as he opened the auction.
Referringto the transparency of the auction, he said it was "very importantbecause many international companies are participating, in public andon television."
"The old way was in darkened rooms, behind closed doors. But today, it is clear to everyone," Maliki said.
Shell and Petronas requested fees of 1.39 dollars per barrel of oilextracted from Majnoon, and projected that they would produce 1.8million barrels per day. It beat out a rival offer from Total and CNPC.
The project will be split 60 percent for Shell and 40 percent for Petronas.
Majnoon,a giant oilfield near the Iranian border, currently produces 45,900barrels of oil per day (bpd) and has proven reserves of 12.58 billionbarrels.
"They (Shell-Petronas) will make a profit, but theyhave made a compromise on profits in order to secure the field," RubaHusari, the founder and editor of
www.iraqoilforum.com told AFP.
"Thetwo (consortiums) were so scared, they just wanted Majnoon, that theytried to undercut each other and one of them really went for the kill."
Husari said the Iraqi government had had a "successful" day.
ForHalfaya, CNPC, Petronas and Total requested 1.40 dollars per barrel andprojected production of 535,000 bpd. The field, which has knownreserves of 4.1 billion barrels, is situated just north of Majnoon.
Nobids were received, however, to work on either the East Baghdad field,or the cluster of fields referred to jointly as Eastern Fields, OilMinister Hussein al-Shahristani said.
He added that althoughAngolan firm Sonangol submitted an offer to work on the Qaiyarah field,the government rejected the bid because it was too high.
Iraqrelies massively on oil sales for its economic growth and governmentincome. It will be hoping the auction, the second since June, generatespositive headlines ahead of a parliamentary election scheduled forMarch 7.
The country wants to boost its oil production to sevenmillion bpd within six years, from the current level of 2.5 million,and is targeting 10 to 12 million bpd in the longer term, potentiallyrivalling Saudi Arabia.
The biggest oil fields on offer in thebid round are Majnoon and West Qurna-2, the latter of which has provenreserves of 12.9 billion barrels of oil and will be up for auction onSaturday.
Successful companies will be paid a fixed fee perbarrel, not a share of the profits, and it will only be paid once anagreed production threshold has been reached.
A tight securityperimeter was thrown up around the oil ministry for the auction, withsome attendees having to abandon their cars around two kilometres (1.25miles) away and walk the remaining distance.
All participants were subjected to multiple checks before being allowed to enter.
Theauction came just three days after coordinated bombings struck Baghdad,mostly targeting government ministries, the third such attack sinceAugust.
Bombers have also repeatedly hit Iraq's oilinfrastructure, most recently sabotaging the main export pipeline fromnorthern Iraq to the Turkish Mediterranean port of Ceyhan in November.
Inthe first bid round in June, only one deal was reached because of theperceived low return on investment being offered by the Iraqigovernment, although two other foreign consortiums have since signeddeals with Baghdad.
At 115 billion barrels, Iraq has the world'sthird-largest proven oil reserves, behind only Saudi Arabia and Iran.Oil sales provide 85 percent of government revenues.
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