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Iraq – oil contracts

First foreign oil contracts in Iraq, Chinese and US companies reject terms

Article published on the 2009-06-30 Latest update 2009-06-30 11:27 TU

An employee at the Tawke oil field in northern Iraq, 27 June 2009(Photo: Reuters)

An employee at the Tawke oil field in northern Iraq, 27 June 2009
(Photo: Reuters)

Britain's BP and China’s CNPC International Ltd will be the first two oil companies to work oil fields Iraq since the country’s energy sector was nationalised over three decades ago. The Chinese companies CNOOC and Sinopec and the US energy company ConocoPhillips withdrew their bids to work in two other oil fields after the government asked them to pay many times the amount they bid per barrel of oil.

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The Iraqi oil ministry announced Tuesday that BP and CNPC International successfully bid for the Rumaila oil field in the south of the country, which has reserves of some 17.7 billion barrels of oil.

Six major oil fields in southern and northern Iraq holding reserves of 43 billion barrels of crude oil and two gas fields around Baghdad were up for bids, nearly forty years after the Baath party nationalised the Iraqi energy sector in 1972.

"These contracts are needed for the reconstruction of Iraq," Prime Minister Nuri al-Maliki said at the opening of the bidding session in Baghdad. "They are for the benefit of Iraqis and the companies."

Foreign oil companies will be required to share management with Iraqi government-owned companies, mainly the South Oil Company, despite providing most of the financing.

While some companies bid in order to get a foot in the door of the Iraqi oil industry, others are not pleased with the terms of the contracts, including a fixed fee per barrel, which already displeased three companies, who withdrew their bids.

CNOOC, Sinopec and ConocoPhillips were asked to pay many times the amount per barrel than they had bid.

CNOOC and Sinopec were asked to pay 25.4 dollars per barrel from the Maysan oil field, but had bid only 2.3 dollars per barrel, according to the AFP news agency.

ConocoPhillips bid four dollars per barrel to work the Bai Hassan field, but was asked to pay 26.7 dollars per barrel.

All three companies have withdrawn their bids.

Thirty-one companies bid on the rights, including ExxonMobil and Shell, along with companies from all over Asia.