The Iraqi oil ministry has given the final model contract and tender protocol to worldwide oil companies for the eight oil and gas fields included in its first bid round, ministry sources and company officials said. The release of the model contract and tender protocol is the first in a series of timelines fixed by the ministry. Oil companies are to pay partaking fees for the fields on which they pick to bid by June 1, 2009.
Parties have to present by June 15, 2009 a bid bond of $5 million to the oil ministry for every field on which they decide to bid. The money is reimbursable for companies that do not receive contracts. By May 15, 2009 companies are required to submit particulars about their representatives to obtain Iraqi visas in turn to attend the bidding session. Next is the bidding and award session on June 29 and 30, 2009 to be held in Baghdad, where international firms will submit their bids and the ministry will reward contracts and name the winning firms. The session will be public and open to the press.
The signing of contracts is to occur in August 2009 as the Iraqi cabinet requires endorsing draft contracts before it can sign them with successful companies. The ministry anticipates the contracts will be approved by the cabinet by July 2009. The producing oil fields in question are Kirkuk and Bai Hassan in northern Iraq, West Qurna phase 1, North and South Rumaila, Zubair and Missan in southern Iraq. The two non-producing gas fields are Akkas in western Iraq and Mansouriya in the centre.
Payment of a participation fee entitles a company to get these documents and to apply for the fields, depending on qualification. About 32 international firms have until now bought these documents out of the 35 companies pre-qualified by the oil ministry, ministry officials said. The oil ministry has already declared a $250,000 fee for each of the two non-producing gas fields of Akkas and Mansouriya, $350,000 for the Missan field and $500,000 for each of the remaining five oil fields. A $2.5 million flat fee has been fixed for all eight fields, the company officials said.
The final tender protocol which was also delivered to companies comprises the ultimate process document for the licensing round and contains extra information on the bidding process and evaluation parameters, the bidding timetable, each field signature bonuses, and a baseline production level for each field. The most important change the directorate had made to the original model contract was that oil firms would have a 75% stake in the joint ventures, with state-owned Iraqi operators at the fields holding the rest, he said. That was up from a 49-51% equity stake initially proposed.
The tender protocol summarizes the bidding parameters. Ministry officials have mentioned some of the these parameters: cost per barrel of maintaining the same output over 20 years, an incremental remuneration fee, and the cost per barrel of increasing output above a predefined production baseline. Oil firms would recover their costs from oil they produce above the baseline. These are 20-year service contracts, which mean that successful companies would get remuneration in kind for each produced barrel in addition to cost fees. Big oil companies prefer deals that give them a share of profits and permit them to book reserves.
Baghdad expects contracts for the fields will help enhance the country’s crude production capacity to 4.5 million barrels a day by 2012 from 2.4 million barrels a day at present.