Iraqi oil minister expects strong competition in 2nd bidding round on oil fields

Iraq’s oil minister said Sunday he expects strong competition among international oil companies in a second round of bidding next month on the country’s lucrative oil fields.

Forty-five international oil companies — including Exxon Mobil Corp., Chevron, BP Group PLC., ConocoPhillips and Total SA — have been cleared to compete for the rights to develop 15 oil fields on offer in 10 projects.

Iraq’s first postwar auction in June flopped after most foreign oil companies rejected the price Baghdad set for each barrel produced. Only one contract was awarded out of eight oil and gas fields on offer.

“We expect the world’s biggest oil companies to come and submit their offers … good competitive offers,” Oil Minister Hussain al-Shahristani told reporters.

He added that the per-barrel-produced fee for the second bidding round on Dec. 11-12 will be studied carefully for each field to reach a fair price for development.

The single deal reached in the first round went to British oil giant BP PLC and its partner CNPC of China for Iraq’s biggest oil field, the 17.8 billion-barrel Rumaila field in the country’s south.

The companies plan to raise production from the current 1 million barrels a day to 2.85 million barrels a day, and will receive $2 per barrel produced.

Two international consortiums have since revised their bids to develop two other prized oil fields near Rumaila.

The first consortium, grouping U.S. and European oil giants Exxon Mobil and Royal Dutch Shell PLC, has signed a preliminary deal to develop the 8.6 billion-barrel West Qurna Stage 1 field for $1.9 per barrel produced. They aim to boost production from the current 280,000 barrels per day to 2.325 million.

The second consortium is led by Italy’s Eni SpA, in partnership with Occidental Petroleum Corp. of the U.S. and South Korea’s KOGAS. They are to develop the 4.1 billion-barrel Zubair oil field. The consortium aims to boost output to 1.1 million barrels per day, up from the current 200,000 barrels per day.

Both of the 20-year contracts still need the government’s final approval.

Al-Shahristani estimated the combined projected output from Rumaila, West Qurna Stage I and Zubair will exceed 6 million barrels a day in six to seven years.

Although Iraq sits on the world’s third-largest oil reserve, the country is producing and exporting far below its potential.

Foreign companies are seen as key to reviving the sector and ramping up output, with the increase crucial for Iraq as the nation relies on oil exports for 95 percent of its foreign revenues.