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Baghdad Launches Tender For Energy Development


An Iraqi oil field near Basra (file photo)
An Iraqi oil field near Basra (file photo)
Iraq has opened its fourth post-Saddam Hussein auction for oil and natural-gas contracts, with dozens of firms registered to bid for the rights to develop the country's energy sector.

But hopes that the sale would raise currency reserves and boost Iraq's role as a key energy producer were dampened when just one out of six deals offered on May 30 was approved.

Hours after the auction officially began, Baghdad awarded the first contract to a consortium led by a Kuwaiti firm.

The Associated Press says Kuwait Energy and its partners, Turkey's TPAO and the United Arab Emirates' Dragon Oil, are to be paid $6.24 for each barrel of oil they find within a 900-square-kilometer area in the southern province of Basra.

But bids were made on just one other site on May 30 -- an exploration block in south Iraq thought to contain oil that received a bid from a consortium of Britain's Premier Oil, PetroVietnam, and Russia's Bashneft.

Baghdad refused to award that contract, saying the bid did not meet the Oil Ministry's asking price.

Bidding is scheduled to continue on May 31 for rights to explore six other sites -- along with two of the four sites that received no bids on May 30.

Unlike the three previous tenders since 2003, which offered contracts to foreign firms for boosting output at existing oil and gas fields, the two-day auction is for the exploration of 12 undeveloped sites.

Most are in western and central Iraq. Seven of the sites are thought to hold natural gas, while five are thought to hold oil.

In all, 47 companies have registered to bid, including 39 foreign firms.

Kurdish Question

Iraq is mandating that the firms that win contracts cannot sign deals with the autonomous Kurdish region or any other regional authority without central government approval.

The Kurdish regional government has signed dozens of contacts with foreign firms, but the central Iraqi government considers them all to be illegal because they were not approved by Iraq's Oil Ministry.

U.S.-based multinational ExxonMobil -- which has a contract to increase output at one of Iraq's biggest oil fields -- will not be taking part in this week's tender. That's because the energy giant is among the firms barred from the auction for having signed a deal with the Kurdish region without Baghdad's approval.

This week's auction was postponed several times by Iraq's Oil Ministry in order to address complaints by potential bidders about contract terms.

In February, Baghdad made concessions to lure participants to the tender, notably by dropping a clause that required companies to be partners with a state-run oil operator.

The firms that win the bidding are offered a service contract, under which they are paid a predetermined fee for their services.

Such deals are seen as less advantageous than production-sharing contracts which allow the firms that carry out the exploration for energy resources to claim a share of the profits from their discoveries.

With reporting by Reuters, AP, and AFP
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