Oil Bonanza as Companies Vie for Iraqi Fields
{{#rendered}} {{/rendered}}International oil companies vied Friday for the biggest slice of Iraq's oil riches on offer in decades, with Iraqi officials hoping the firms will look beyond persistent security fears and strike deals crucial for the country's reconstruction efforts.
Iraqi Prime Minister Nouri al-Maliki, at the start of the auction Friday, looked to allay oil executives concerns about the bombings and other incidents that have come to define his oil-rich nation after the 2003 U.S.-led invasion to topple Saddam Hussein.
"There is no security deterioration in Iraq even if a security violation took place here," al-Maliki told officials and company representatives gathered at Iraq's Oil Ministry under extremely tight guard.
{{#rendered}} {{/rendered}}And at least two consortiums appeared poised to do take him at his word — tempted by a chance to tap into one of the Middle East's last major cheap oil bonanzas.
One led by European oil giant Shell won the rights to develop the southern Majnoon oil field — the biggest of the 15 fields on offer in the two-day licensing round. A second consortium led by the China National Petroleum Corp., or CNPC, won the rights to the Halfaya field, also in the south.
In this two-day round, 15 fields are on offer, representing about a third of Iraq's known reserves. But a wave of attacks across Baghdad earlier this week killed at least 127 people and shook confidence in the abilities of Iraq security forces as U.S. troops depart.
{{#rendered}} {{/rendered}}A total of 45 firms are vying for 20-year contracts to develop the 15 fields, spanning from northern Iraq to major fields in the Basra region in the south like Majnoon and Halfaya. They include many Western giants like Exxon Mobil Corp. and Britain's BP PLC, as well as state-backed companies from Asia.
In the first deal of the day, Shell and Malaysia's state-run Petronas beat out a consortium grouping France's Total SA and China's CNPC to develop Majnoon, a 12.88 billion barrel behemoth in the Basra region.
Under the deal announced by Iraqi Oil Minister Hussain al-Shahristani, the Shell-Petronas consortium will receive $1.39 per barrel produced from the field. The companies bid said they would raise production from the current 45,900 barrels per day to a whopping 1.8 million barrels per day over a ten-year period.
{{#rendered}} {{/rendered}}Total and CNPC had asked to receive $1.75 per barrel, while offering to raise production to roughly 1.4 million barrels per day.
In the second deal, CNPC, teaming up with Petronas and Total won rights to develop Halfaya, which has estimated reserves of 4.1 billion barrels. Under the terms of the deal, the companies will get $1.40 per barrel produced, and said they would raise production from the current 3,100 barrels per day to 535,000 barrels per day.
The CNPC-led consortium beat out three others, which were led by Italy's Eni, Norway's Statoil ASA and India's ONGC.
{{#rendered}} {{/rendered}}The deals are crucial for Iraq, which relies on oil for 90 percent of its government budget and sorely needs international companies' help in boosting production and revamping its dilapidated oil sector.
The current fields on offer are known as "green" fields, ones which have yet to be fully developed.
Iraq's first postwar bidding round in June flopped as firms resisted the financial provisions imposed by Iraq, which has the world's third-largest known oil reserves.
{{#rendered}} {{/rendered}}The second round is scheduled for Saturday.