BAGHDAD — Iraqi officials cheered and clapped as the first oil field up for bid went to a major international consortium at the opening of the country’s biggest postwar auction Friday. But from there, the chill set in.
Oil executives from around the world made deals on only two fields, both in Iraq’s relatively stable south, while shunning six others in regions with sporadic violence — and where the risk outweighs the profits that the Iraqi government is offering.
Iraqi officials portrayed the day as a success because they secured deals that will ramp up production in the two giant fields.
But the lack of energetic bidding highlighted Iraq’s difficulties in turning its wealth of oil into a financial bonanza.
Energy experts say Iraq has been tightfisted in the deals it has offered major producers. There also is a long-running feud between the central government in Baghdad and the Kurds over control of petroleum reserves in the north.
Security is yet another issue, particularly in central Iraq and areas north of the capital.
“Iraq can absolutely get big commitments” from oil firms, Samuel Ciszuk, Mideast energy expert with London-based IHS Global Insight, told The Associated Press. “But with the current situation, they can only make progress on the biggest and cheapest fields” where the security risks and development costs are low.
Oil majors in the U.S. have not spoken openly about the bidding process, saying only that there is interest in Iraq. Friday, officials with Marathon Oil Corp., Exxon Mobil Corp. and Chevron Corp. had no comment.
One big reason oil majors haven’t rushed back into Iraq are the terms that the government is offering. Companies must accept 20-year service contracts and receive a flat fee per barrel instead of production-sharing contracts, which are much more lucrative.
Winning bids
Majnoon field: A consortium grouping Shell and Malaysia’s state-run Petronas won the 12.58- billion-barrel behemoth. Shell-Petronas will take $1.39 per barrel produced and said it would raise production from the current 45,900 barrels per day to 1.8 million barrels per day over 10 years.
Halfaya field: CNPC, Petronas and Total beat out three other consortiums for the field, which contains 4.1 billion barrels. The consortium will get $1.40 per barrel produced and plans to raise production from the current 3,100 barrels per day to 535,000 barrels per day over 13 years.
