April 14, 2018 / 11:30 AM / 3 months ago

Iraq's oil development contracts may draw 14 bidders

BAGHDAD (Reuters) - Fourteen companies have expressed interest in oil and natural gas exploration and development contracts to be auctioned by Iraq on April 25, the oil ministry in Baghdad said on Saturday.

The 14 have bought a package containing the bidding documents and terms of the contracts for the 11 exploration blocks to be auctioned, it said in a statement.

The blocks, located in border areas with Iran and Kuwait, and in offshore Gulf waters, were to be auctioned in June.

That date was brought forward to April 15 and then postponed to April 25 to give bidders more time.

The oil ministry last month announced measures to reduce the fees paid to oil companies in the contracts to be auctioned.

The new contracts will exclude oil by-products from thecompanies’ revenue, establish a link 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. OPEC’s second-largest producer after Saudi Arabia, Iraqdecided to change the contracts after a glut caused oil pricesto crash in 2014, reducing Baghdad’s ability to pay such fees. Companies including BP, Exxon Mobil, Eni, Total, Royal Dutch Shell and Lukoil have 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 that is 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.Iraq continues to flare some of the gas extracted along side crude oil at its fields because it lacks the facilities to process it into fuel.Iraq hopes to end gas flaring by 2021. Flaring costs the government nearly$2.5 billion in lost revenue each year and could meet most of its unmet needs for gas‐fired power, according to the World Bank.

Reporting by Maher Chmaytelli; editing by Jason Neely

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