Few Bidders to Develop Iraqi Oil and Gas Fields

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Published at: www.nytimes.com

BP Steals a March on Competitors in Iraq

July 3, 2009

Analysis by: GLG Expert Contributor

BP's bid for the Rumaila oil field has been approved by Iraq's cabinet.  Bids were rejected on 6 other fields, and the 8th contract (Mansuriyah gas field) saw no bids.  Iraq presents the classic oil industry case of IOC knowledge and money combining with an NOC's access to reserves to secure production.  The fee based contract for the Rumaila oil field is reported at $2/bbl and will probably require capital investment by the BP group.  Details of the contract are scarce, but there is probably no provision for BP to book reserves.  Other western IOCs (Exxon, ConocoPhillips, ENI) walked away from the auction empty handed - siting low fees as the problem.  Many NOCs (ONGC, CNOOC, Sinopec, Kogas, Lukoil, Gazprom) were involved in failed bids.  Why did BP take this low offer while the rest of the industry rejected it?

Michael LynchConsultantMichael E. Lynch

The BP/China National joint venture has hard redevelopment work facing it

July 2, 2009

Timothy Williams in Baghdad reported in the July 1 issue of the New York Times that the Iraqi government failed to attract good offers in a public auction on Tuesday for rights to its oil fields. The single successful contract went to a joint venture of BP and China National Petroleum Corporation. The two companies won the right to develop Rumaila with reserves of 17 billion barrels, near the city of Basra. The auction came on the same day as the deadline for American troops to leave the Iraqi cities. The auction represented the greatest attempt since it was nationalized by Saddam Hussein in 1972. Representatives of Exxon Mobil, Lukoil, Japex, Total, Korea Gas and Royal Dutch Shell made offers. BP and China National will now negotiate with the Iraqi Oil Ministry to complete a contract. Iraq says only 1 million bbl/day are pumped from Rumaila which is far less than the government thinks is possible. The two companies agreed to get $2/bbl for oil produced above the baseline.