* Big oil firms to bid in 2nd round despite political risks
* Competition fierce as companies fear missing out
* 2nd round takes place just a month before elections
By Simon Webb and Ayla Jean Yackley
ISTANBUL, Oct 19 Iraq is poised in the coming
weeks to sign a series of deals that promise to lure the tens of
billions of dollars it needs to become one of the world's elite
In addition to signing contracts already being negotiated,
the world's largest energy companies will face off in December
in a second fierce competition to develop some of the country's
largest untapped oilfields.
The allure of the world's third-largest oil reserve holder
outweighs concern that future Iraqi governments could tear up
contracts in a country where there is no consensus on control of
"Every company has to be involved in Iraq, it is as simple
as that," said one executive who attended a two-day oil contract
workshop in Istanbul hosted by Iraqi officials.
"It is historic. It is too big to miss. The legal risk is a
problem, but there are less questions than at the first bid
The second bidding round since the U.S.-led invasion in
March 2003 could see deals that would add millions of barrels
more to Iraq's future oil output, building on the promise of
huge gains through deals that Baghdad is close to finalising
after the first bidding round in June.
In the past week, several big oil companies have agreed to
terms they had previously rejected after Iraq sweetened deals by
lowering taxes. Oil firms that missed out on those deals would
push very hard for contracts in the second round, oil executives
in Istanbul said.
"Now that some of the big boys have signed up for these low
fees, we have to compete. It's scary as hell but we have no
choice," said another executive.
The second bid round is set for Dec. 11-12, just a month
before elections in January. The durability and legality of
deals from both rounds could quickly face a test if a new
government is elected. Oil firms fear that future governments
may tear up the contracts.
Politics have dogged attempts since the invasion to overhaul
an oil industry shattered after years of sanctions and war.
Lawmakers warned foreign oil firms on Monday that the next
administration could alter any deals.
"Oil companies ... should take into consideration the big
risk behind these contracts," Ali Hussain Balou, head of
parliament's oil and gas committee, told Reuters. [ID:nLJ10384]
"There are no guarantees for the oil companies that the new
government will follow the same path in dealing with them. These
contracts might be cancelled or at the very least revised."
In Istanbul, Prime Minister Nuri al-Maliki's energy adviser
said there were as many parliamentarians in favour of the deals
as against and less opposition within the country to the second
bid round than the first.
"There is a sort of wisdom now in the country, an
understanding that's widespread ... that this project is a
national project," Thamir Ghadhban said.
"Therefore we will expect a smooth transition and an
enduring commitment of the future government to whatever
commitments this government is taking regarding oil contracts in
the first and second rounds."
A new oil law was to be the framework for long-term
investment, but sharp differences between Baghdad and the
Kurdish region have delayed the legislation for years. Without
it, Iraq is relying on Saddam-era laws untested in a democracy.
The Iraqi government is close to sealing three deals for
oilfields that were left unclaimed in the first round.
The final contract with BP (BP.L) and China's CNPC to
develop the super giant Rumaila, its largest oilfield, could be
signed within three weeks, the first major new oilfield deal
since the invasion, an Iraqi official said on Monday.
[ID:nLJ710451]. Cabinet approved the deal last week.
France's Total (TOTF.PA) and a consortium led by China's
CNPC have revised bids to develop West Qurna, Abdul-Mahdy
al-Ameedi, deputy director of the Oil Ministry's licensing
office, said at a news conference in Istanbul.
They will compete against consortiums headed by Exxon Mobil
(XOM.N) and LUKOIL (LKOH.MM) who have also revised bids
The Iraqi cabinet is also now considering approval for a
contract won by a group led by Italy's ENI (ENI.MI) for the
Zubair oilfield. Production at Rumaila, Zubair and West Qurna
could almost triple Iraq's output to 7 million barrels per day.