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Iraqi Gasfield Auction Winners Announced

Kuwait Energy Co., Turkiye Petrolleri AO and KazMunaiGaz National Co., Kazakhstan’s state fuel producer, won rights to develop three Iraqi natural-gas areas as the country seeks supplies for power plants and export

Iraqi Gasfield Auction Winners Announced

Iraq today awarded rights to develop Akkas, Mansouriya and Siba, which together hold 11 trillion cubic feet of fuel, Oil Minister Hussain al-Shahristani said at an auction in Baghdad. Iraq will sign preliminary agreements with the winners in the next few days and send the contracts to parliament for final approval, he said.

The Persian Gulf state, reliant on oil for most of its income, is seeking foreign investors after years of conflict and sanctions. The licensing round is the third since the U.S.-led invasion that toppled President Saddam Hussein in 2003. Iraq won pledges from oil producers including Exxon Mobil Corp. and OAO Lukoil to boost the country’s total crude output to 12 million barrels a day after two licensing rounds last year.

“Iraq is already committed to oil developments that will yield associated gas in amounts that are multiples of what was agreed to today,” said Tariq Shafiq, an adviser with London- based Petrolog & Associates and a former Oil Ministry official.

Royal Dutch Shell Plc, which won contracts to develop Iraqi crude deposits, is working to capture and use about 700 million cubic feet of gas that’s currently being burnt at oil fields in the country’s south.

Shell Gas Exports

Iraq’s $12.5 billion gas production venture with Shell may be able to start exporting the fuel by 2015 when output from the country’s southern fields meet domestic demand, Ali al-Dabbagh, a government spokesman, said in June. The country, which pumps about 2.3 million barrels of oil a day, produces about 1.1 billion cubic feet of associated gas daily.

Today’s auction “comes at a time when there’s already a lot of gas being burned,” according to Shafiq, who said he’s against the auction process. Iraq’s government is transitional after elections in March failed to yield a clear winner.

KazMunaiGaz and Korea Gas, or Kogas, won rights to develop Akkas, the largest deposit offered today, the oil ministry said in a statement. The partners, with equal stakes in the bidding group, agreed to produce 400 million standard cubic feet of gas a day at a price of $5.50 per barrel of oil equivalent.

Kuwait Energy, TPAO

Turkey’s state oil company, known as TPAO, bid on all three fields and won two, while Korea Gas Corp. participated in two of the winning rbids. A group including Kuwait Energy, TPAO and Kogas won the rights to develop the Mansouriya area, pledging to produce 320 million standard cubic feet of gas a day for $7 per barrel of oil equivalent produced, the maximum the government would agree to pay, the oil ministry said.

Kuwait Energy and TPAO won the bidding for the Siba field, agreeing to produce 100 million standard cubic feet of gas a day at a price of $7.50 per barrel of oil equivalent.

Akkas, discovered in the western Anbar province in 1998, holds 5.6 trillion cubic feet of gas and has six wells, al- Shahristani said in May. Mansouriya, discovered in the eastern Diyala district in 1979, potentially holds 4.5 trillion cubic feet of gas and has four wells, while Siba, found in 1968 in Basra, has 1.1 trillion cubic feet of gas and three wells, he said. Separately, the U.S. Energy Information Administration estimates the reserves for the areas at 7.6 trillion cubic feet.

Eni Spa and Total SA, the largest oil companies in Italy and France, were among 13 companies that qualified to bid for the three natural gas areas, the oil ministry said. Total participated in one losing offer for the Akkas deposit.

Failed Bids

Other potential bidders included Edison SpA, whose joint bid with Kogas and TPAO for the Akkas field was rejected by the government as too low during the first round of bidding last year.

Iraq awarded a dozen service contracts to international oil companies including Exxon and Shell as it aims to more than double its current crude output of 2.3 million barrels a day.

The 45 companies that bid last year were invited to bid for the three gas fields, where Iraq wants to raise production four- fold. Today’s auction was delayed twice from Sept. 1. Some of the fields on offer weren’t bid on in the auctions last year.

Other companies qualified to bid today included Itochu Corp., Oil & Natural Gas Corp., Statoil ASA, Mitsubishi Corp., and TNK-BP, the ministry said.

Iraq may earn $4.2 trillion in revenue from oil fields being developed by international companies after rights for production from the deposits were auctioned last year, al- Shahristani said today.

Domestic Needs

The oilfields, whose development rights were assigned after two bidding rounds, will produce 60 billion barrels of oil, he said. The Iraqi government will get 99 percent of the revenue from those deposits, al-Shahristani said today.

Iraq intends to export 50 percent of the gas produced in the three gas fields, the amount in excess of its domestic needs, Abdul Mahdy al-Ameedi, deputy director general at Iraq’s Petroleum Contracts and Licensing Directorate, said on Aug. 2.

Akkas and Mansouriya were among the fields offered in bidding last year. No investors bid for Mansouriya then, and the ministry rejected the sole offer for Akkas made by the Edison- led group of five companies. The ministry initially included Siba in the second round then withdrew it.

Iraq will present a draft agreement to the cabinet for a gas joint venture with Shell by the end of the year, al- Shahristani told reporters in Vienna on Oct. 14. The country is also a possible source of gas for the planned Nabucco pipeline project, which aims to reduce Europe’s dependence on Russian fuel.

Source : Bloomberg

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