Iraq To Offer 10 Oilfields In Its Second Bidding Round

Iraq is planning to offer 10 of its untapped oilfields in its second bidding round in December 2009, Reuters reported. The contracts for the second round are little different from the revised contracts for the first round. The second bidding round contracts are 20-year oil service contracts.

The first round was launched in June 2009, when only one of eight oil and gas fields auctioned was awarded as most foreign oil companies rejected considering it as tough contracts.

Since then, the terms of the contract were simplified. The country is now in the process of signing re-negotiated contracts for two of the fields that it failed to award in the first round of bidding.

Both the first and second round contracts vary from each other in terms of tax, plateau production and bidding parameters.

In the first round, oil considered that they would be taxed at 35% on all revenues. Later, the government declared that the tax will only apply to profit, and not to all revenues along with those used to recover costs.

In the second round, oil companies have seven years to achieve their target production rate and are required to maintain that target rate from seven to 13 years. The duration of the target production rate will vary as per various fields. Whereas in the first round, target or plateau production was to be reached in six years and maintained for seven years.

Parameters will be more equally weighted in the second round. The two parameters for bidding are the target production and the remuneration fee per barrel that oil companies want for the work. But in the first round, more priority was given to the target production. The change is to prevent oil companies submitting unrealistic production targets, according to oil officials.

One of the key differences between the two rounds was that the fields on offer in the second round are undeveloped and mostly not producing whereas the fields offered in the first round were some of Iraq’s biggest producing fields.

Companies bidding in the first round were concerned about the state of infrastructure at the fields, environmental damage and the state of reservoirs after years without proper maintenance. Whereas in the second round, the bidding companies are concerned about issues such as present use of land at fields, access to water, clearance of mines and other war hazards and the treatment of the domestic population.