BP, China win right to develop Iraq's Rumalia oil field Anthony DiPaola and Maher Chmaytelli Bloomberg News Tuesday, June 30, 2009
BP PLC and China National Petroleum Corp. won the right to develop Rumaila, the largest Iraqi oil field in today's licensing round, as the war-torn country seeks to more than double production over the next six years.
The BP-led group beat a bid from Exxon Mobil Corp. and Malaysia's state oil company, an Oil Ministry spokesman in Baghdad said. Six oil and two gas fields in today's bidding round may yield US$1.7-trillion in profit over 20 years for the country, Oil Minister Hussain al-Shahristani said in a speech broadcast on live television.
"This is the only resource of wealth available to us at this time," Prime Minister Nuri al-Maliki said in a speech at the start of the licensing round in Baghdad today, where foreign oil companies are bidding for service contracts.
Eight of the world's top 10 non-state oil producers, including Royal Dutch Shell Plc and ConocoPhillips, are vying for the right to help Iraq develop the country's oil and gas resources. More than 30 companies are bidding for US$16-billion worth of technical service contracts for the fields.
Iraq is inviting international oil companies back into the country after kicking them out in 1972, when the party of late dictator Saddam Hussein nationalized concessions. The license round was set to start yesterday and delayed one day after sandstorms closed Baghdad's airport, preventing oil executives from reaching the capital with their bids.
‘Revenue is Enormous'
"It's a great move forward for Iraq and the revenue is enormous," Peter McGuire, managing director of Commodity Warrants Australia, said in a Bloomberg TV interview on Monday. "So it's a massive amount of money for Iraq, huge."
Holder of the world's third-largest oil reserves, Iraq is struggling to raise output and revenue from crude sales after six years of conflict and prior sanctions destroyed the economy and infrastructure. The government aims to boost oil output to 4 million barrels a day within the next five years, from about 2.4 million barrels.
U.S. combat troops, under agreement with the Iraqi government, left the country's cities today in a step toward a planned full withdrawal by the end of 2011.
Shahristani defended the oil round in parliament last week after Prime Minister Nuri al-Maliki's government was criticized by lawmakers for failure to raise oil production faster and because of concerns the deals won't benefit Iraq. The government will support the winning bidders in developing the fields, al-Maliki said today.
BP Wins Rumaila
The BP-led group beat a bid from Exxon and Petronas Carigali Sdn. Bhd. for Rumaila after improving their offer, the ministry spokesman said. The Iraqi government set a requirement that bidders agree to produce crude from the field at a cost of US$2 a barrel, lower than the price BP and Exxon initially bid.
Rumaila, which now produces 956,000 barrels of oil a day, is the largest field on offer and the first awarded today. The BP group proposed to boost Rumaila's output to a plateau of 2.85 million barrels of oil a day at an average cost of US$3.99 a barrel, according to the bid presentation.
The Oil Ministry had given the BP and Exxon groups time to improve their offer to develop the Rumaila field after neither offer met the government's minimum requirements.
BP spokesman Toby Odone in London said the company is "looking forward to the next step toward finalizing the service contract." The Iraqi Cabinet will approve the winning bids within a week, al-Shahristani said.
Mansuriya, Bai Hassan
Iraq received no bids for the Mansuriya natural gas field, the second it offered.
ConocoPhillips was the only bidder for the Bai Hassan oil field. A group led by Italy's Eni SpA dropped its bid to develop the Zubair oil field in southern Iraq after it rejected to lower the proposed cost. A group led by China National Petroleum also dropped its bid for Zubair.
Shell bid to develop the Kirkuk oil field, together with China Petroleum & Chemical Corp. and Turkish Petroleum Corp., Shell spokesman Adam Newton said by telephone today.
The fields set to be awarded collectively produce a total of about 2 million barrels of oil a day, al-Shahristani said at the start of the licensing round.
Iraq later this year plans to hold a second auction round for 11 oil and gas fields with the aim to boost production to about 6 million barrels a day by 2015. Saudi Arabia, the world's biggest oil exporter, produces 8 million barrels a day.