Iraq's First Licensing Round (2009)

From Oil4All
Jump to: navigation, search

Oil Minister Hussein Shahristani launched Iraq's first licensing round in 2008. Bids on more barrels of oil in a single bid round than at any other time or place in history were made open to international oil companies[1], who had not had any significant activity in oil operations in Iraq since nationalisation in 1974. Some 22 companies took part in the licensing round.[2]

In the end only one field, Rumaila, was awarded in the auction process itself, though two other fields, Maysan and West Qurna Phase 1, were subsequently awarded in bilateral negotiations.[3]

Process

By early 2008 companies were invited to pre-qualify for an auction process. Many experts in resource transparency regard auctions as the best way to manage both the danger of corruption and asymmetry of information between governments and companies at the production award stage[4].

On the 18 Feburary 2008 the government announced some 35 international companies, including many of the so-called "majors", had passed the pre-qualification stage out of a total of 140 companies who applied. They were evaluated on five criteria: technical, financial, legal, training, and HSE (Health, Safety and Environment).[5]

Between February 2008 and April 2009, the Ministry of Oil undertook a number of other preparatory measures common for auctions, such as publishing packages of geological and other data for companies to review, running a roadshow to present the auction opportunities in London and a workshop to explain the auction process[6]. The government also published model contracts for oil[7] and gas[8] and invited company comments, which were then absorbed into a revision process in May 2009.[9].

Evaluation Criteria

The government announced there would be two main criteria on which all bids would be judged:

Firstlyl, the production plateau offered by a consortium for any given field, where the higher the production they were guaranteeing the better. The government itself set a minimum production level it was prepared to accept for each field based on its reserves and historic production, which varied between 2.75 million barrels per day (bpd) for Rumaila and 450,000 bpd at Maysan.

The second set of criteria related to the remuneration fee the consortium would accept per barrel it produced once it reached the plateau - the lower the fee, the higher the companies would score. It was on this question that there were wide discrepancies between maximum remuneration fees set by the government, and offers made by the companies themselves. In the case of Rumaila, BP offered the lowest bid with an offer of $3.99 a barrel, but that was still double the maximum the government specified of $2 per barrel.[10] At other fields the gaps were even wider. At Maysan, for example, the consortium led by CNOOC accepted a fee of $2.30 in later bilateral negotiations, having originally proposed a fee of $21.40.[11]

Results

The only award made as a direct results of the the auction round was to BP, in association with Chinese CNPC, for the Rumaila field, although the award was not immediate and bilateral negotiations continued until a deal was announced in November 2009.[12]

The other oil fields offered were Kirkuk, Zubair, Maysan, West Qurna Phase 1 and Bai Hassan. The gas fields of Akkas and Mansuriya, which were included in the first licensing round, were due to be offered again in the third round, due in September 2010.

The fact that only one award was announced in July 2009 out of so many bids and contract areas led some analysts to classify the process as failure[13]. In a leaked US diplomatic cable during the period it was reported that the 30 June results were not a complete victory and that Iraqi leaders said they would accelerate the second bid round and look at ways to make it "more effective" than the first round.[14]

References

  1. "First Oil Bid Round: The Greatest Show On Earth", Wikileaks, 22 June 2009.
  2. "The Results", Iraq Oil Forum, 5 February 2009.
  3. "Oil Companies Making Moves In Iraq", Investopedia, 18 January 2010.
  4. "Managing the Curse of Natural Resources - a charter for politicians", Guardian, 5 February 2009
  5. "Iraq's First Licensing Round - perqualification", Iraq Oil Forum, October 2008.
  6. "Iraq's First Petroleum Licensing Round", Petroleum Contracts and Licensing Division, retrieved 2 August 2010.
  7. "The Model Producing Oil Field Technical Service Contract (PFTSC): An Overview" MEED, 6 July 2009.
  8. "Key legal issues in the third licensing round in Iraq's gas fields", Lexology, 2 August 2010.
  9. "Iraq Contract Revisions Clear Obstacles To Oil Expansion" MEES, 4 May 2009.
  10. "Iraq’s First Petroleum Licensing Round Rumaila Contract Area – Bidding Results" Petroleum Contracts and Licensing Directorate, 30 June 2009.
  11. "Iraq to Develop Maysan Oil Fields with Chinese Firms" Investors in Iraq, 3 October 2010.
  12. "BP in Iraq, BP, retrieved 9 January 2012.
  13. "Iraq Oil Bidding in Shambles, Wall Street Journal, 1 July 2009.
  14. "Iraq,s First Oil Bid Round: Too Hard A Bargain?, Wikileaks, 1 July 1 2009