April 12, 2018 / 5:59 PM / 8 months ago

UPDATE 1-Iraq postpones oil and gas auction to April 25

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DUBAI, April 12 (Reuters) - Iraq has postponed its oil and gas bidding round for 11 new blocks to April 25, a senior Iraqi oil official said on Thursday.

Iraq had originally planned to award oil and gas exploration and development contracts for the new blocks, located in border areas with Iran and Kuwait, and in offshore Gulf waters, on April 15.

“The bidding process was rescheduled to be on April 25. It is just to give the companies a little bit more time to submit the bid bonds and be prepared for the bidding,” Abdul Mahdi al-Ameedi, head of the Iraqi oil ministry’s licensing and contracts office, told Reuters.

The new contracts will exclude oil by-products from the companies’ revenues, establish a linkage between prevailing oil prices and their remuneration, and introduce a royalty element.

Oil companies operating in Iraq currently receive a fee from the government linked to production increases, which include crude and oil by-products such as liquefied petroleum gas and dry gas.

OPEC’s second-largest producer after Saudi Arabia, Iraq decided to change the contracts after a glut caused oil prices to crash in 2014, reducing Baghdad’s ability to pay such fees.

Companies including BP, Exxon Mobil, Eni , Total, Royal Dutch Shell and Lukoil helped Iraq expand production in the past decade by over 2.5 million barrels per day (bpd) to about 4.7 million bpd.

The semi-autonomous Kurdistan Regional Government produces oil and gas from fields it controls in northern Iraq under a production-sharing model more profitable to companies.

The new contracts offered by Baghdad will also set a time limit for companies to end gas flaring from oilfields they develop on territory under its control.

Iraq continues to flare some of the gas extracted alongside crude oil at its fields because it lacks the facilities to process it into fuel for local consumption or export.

Iraq hopes by 2021 to end gas flaring, which costs nearly $2.5 billion in lost revenue for the government and would be sufficient to meet most of its unmet needs for gas‐based power generation, according to the World Bank. (Reporting by Rania El Gamal. Editing by Jane Merriman and Dale Hudson)

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