* 4th round signature bonuses could total $235 million
* Only minor tweaks to final contract
* Exxon barred from May 30-31 exploration auction
By Peg Mackey
LONDON, April 20 Baghdad unveiled on Friday a
list of signing bonuses and the final contract for a forthcoming
energy auction, the latest stage in a bold oil expansion plan
that moves on from developing existing oilfields to searching
for new reserves.
After targeting production capacity in three post-war
licensing rounds, Baghdad is now focusing a fourth tender mostly
on finding gas in remote parts of western and central Iraq.
The country is potentially one of the world's last great
unexplored territories after decades of neglect due to wars and
According to a "Final Tender Protocol" obtained by Reuters,
the 12 oil and gas exploration blocks up for grabs on May 30-31
could net the central government up to $235 million in
non-recoverable signing fees if they are all taken up.
Those companies awarded contracts will each be obligated to
spend a minimum of $90 million to $130 million, depending on the
Companies will be able to extract gas discovered in the
blocks immediately, but the Iraqi government has retained the
option to make companies wait up to seven years to start
extracting oil and pay them compensation in exchange.
The auction was repeatedly pushed back as potential bidders
had strong complaints about the terms of the initial service
contract. Baghdad made some improvements in February.
"It was a move in the right direction, but there is still
potential for a delay in development - especially if oil is
found," said a senior oil executive.
The definitive model contract issued on Friday has only
minor changes compared with the draft, said an Iraqi oil
"The economic terms in the final contract are more lucrative
and favourable to the foreign firms compared to the service
contracts of the previous rounds," he said.
U.S. oil major Exxon Mobil did not make the final
list of 47 pre-qualified bidders for the fourth round, because
it had signed a deal with the semi-autonomous Kurdish north.
But Exxon, along with other companies that have existing
Iraqi licenses such as BP, Eni and Royal Dutch
Shell, may look to explore for oil below and beside
their existing oilfield projects, instead of competing for new
Total has also provoked Baghdad by expressing
interest in Kurdistan. But Chief Executive Christophe de
Margerie, long a critic of Iraq's service contracts, said the
French major will not seek deals in the exploration round.
"The majors that participated and were successful in the
(first three) oil rounds have their fill of southern Iraq by
now," said a Western oil company source.
The fourth round could present an opportunity for those not
involved in Iraq's upstream such as oil major Chevron,
for trading companies and Middle Eastern energy firms.
"There are a number of newcomers on the shortlist that have
lots of money," said a Western industry source.
Following its earlier oil licensing rounds, Iraq raised its
proven oil reserves by 25 percent to 143 billion barrels, and
experts say tens of billions of barrels are still to be found.
Baghdad now wants to prove up even more. The 12 blocks on
offer are expected to add 29 trillion cubic feet of gas and 10
billion barrels of oil to reserves.
The government is also keen to show that it is tackling an
acute power crisis by searching for more gas.
Industry sources say the potentially gas-rich blocks on
offer are attractive but that Baghdad has no clear strategy for
the transport and use of any resulting gas production, which
could make some loath to bid.
Political instability in nearby Syria, a destination and
transit route for proposed gas pipeline exports, may also give
some investors cold feet.
Iraq already has significant volumes of associated gas that
are produced alongside oil at the giant southern fields of
Rumaila, West Qurna-1 and Zubair. But most of that is flared.
For those hoping to find oil, the big prize is Block 9 in
the southeast near the border with Iran.