Electioneering may have cost Iraq big oil deals

Only nine companies out of 26 pre-qualified took part.
Sunday 29/04/2018
A margin to manoeuvre. Iraqi Oil Minister Jabar Ali al-Luaibi speaks in Baghdad, last November. (Reuters)
A margin to manoeuvre. Iraqi Oil Minister Jabar Ali al-Luaibi speaks in Baghdad, last November. (Reuters)

LONDON - Iraq opened more of its untapped oil and gas resources to foreign developers, hoping to boost revenues after its costly war against the Islamic State (ISIS) but the rushed bidding process — rescheduled to precede national elections — may have resulted in a lukewarm response.

Iraqi Oil Minister Jabar Ali al-Luaibi in March unexpectedly moved the date to receive bids from late June to April, meaning the bidding would be before May 12 national elections. Some said Luaibi, who is campaigning for a seat in parliament, moved up the date for political reasons.

Luaibi hopes to represent the oil-rich southern province of Basra as a member of the Victory Alliance, which is led by Iraqi Prime Minister Haider al-Abadi, who is running for re-election.

“Personal and partisan interests are taking priority over national interests,” Ruba Husari, managing director of the consulting firm Iraq Insight, told the Associated Press. “The objective of the exercise is aimed doubtlessly at portraying the ministry — and the minister — as aggressive in developing the nation’s resources ahead of the (elections).”

In previous bidding rounds, officials spent months hosting conferences, road shows and discussions with companies before issuing final contracts.

When Luaibi changed the bid date to April 15, potential bidders asked for more time but the deadline was extended only 11 days, leaving the companies with a short period to study the offered contracts.

Addressing the bidders, Luaibi denied any reason other than developing the country’s border fields that “were neglected for five decades in a best way possible.”

A UAE energy company and two Chinese firms emerged as the only winners in Iraq’s rushed bidding round for nearly a dozen hydrocarbon-rich areas.

Iraq’s fifth auction 

Only nine companies out of 26 pre-qualified took part. Major oil companies — Russia’s Bashneft, Lukoil and Gasprom, the United States’ Exxon Mobil and France’s Total — withdrew.

The auction was Iraq’s fifth since opening its vast resources to international energy companies in 2009.

The UAE Crescent Petroleum landed three deals almost without competition. Two are for the Gilabat-Qumar and Khashim Ahmer-Injana gas fields in Diyala province in north-western Iraq. The company will be entitled to 9.21% and 19.99%, respectively, of net profits from the two fields.

The third deal is to explore and develop the oil-rich Khider Al-Mai block shared by the southern Basra and Muthana provinces. The UAE company’s share in the net profit will be 13.75%.

China’s Geo-Jade company won the rights to explore Naft Khana block in Diyala, rich with oil and dried gas, and Huwaiza block in southern Maysan province. Its share of net profits from the two blocks will be 14.67% and 7.15%, respectively.

China’s UEG won the rights to explore and develop Sindbad green oil field in Iraq’s Basra region. It will be entitled to 4.55% of the net profit.

Six blocks — Zurbatiya, Shihabi, Jebal Sanam, Fao and the Arabian Gulf in Iraq’s territorial waters in the Persian Gulf — in central and southern Iraq received no bids.

The deals will be initially signed on May 10, Abdul-Mahdi al-Ameedi, the head of the Oil Ministry’s Licensing and Petroleum Contracts Department, said. If they are not approved by the government before the elections, they will be left for the next government, he added.

Major oil and gas fields

Iraq’s previous bidding rounds awarded rights to develop major oil and gas fields that hold more than half of its 153.1 billion barrels of proven oil reserves. Then, the auctions drew majors like Exxon Mobil, Royal Dutch Shell, the United Kingdom’s BP, China’s CNPC and Russia’s Lukoil.

As a result, Iraq’s daily production and exports have jumped to levels not seen since the early 1980s. The country is OPEC’s second-largest producer, behind Saudi Arabia, with daily production of around 4.36 million barrels a day from Baghdad-controlled oil fields, up from nearly 2.4 million a day in 2009. Daily exports averaged 3.45 million barrels a day last month.

In the summer of 2014, Iraq’s economy suffered a double shock when ISIS swept across much of northern and western areas and oil prices plummeted. Iraqi forces concluded major military operations against the extremists last year but large parts of the country were reduced to rubble.

In February, Iraq secured $30 billion from international donors to help rebuild devastated areas, far from the $88.2 billion Baghdad estimates it needs. The Iraqi cabinet has approved a 5-year development plan with a target of 6.5 million barrels a day by 2022.

Iraq’s 2018 budget of nearly $88 billion comes with a deficit of more than $10 billion. It is based on a projected oil price of $46 per barrel and a daily export capacity of 3.8 million barrels.

(The Arab Weekly staff and news agencies)