Middle East
Oil firms awarded Iraq contracts
Auction for some of world's largest fields under way amid tight security in Baghdad.
Last Modified: 11 Dec 2009 15:42 GMT
Firms successful in the bidding will still have to
deal with Iraq's security problems [EPA] 

Britain's Shell and Malaysian firm Petronas have been awarded a joint contract to exploit Iraq's giant Majnoon oil field, potentially worth $12bn.

The announcement came shortly after international oil companies, including major Western firms, gathered on Friday amid tight security in Baghdad to compete for deals to exploit the country's natural resources.

"The price that the consortium offered is a little bit less than the price offered by the oil ministry," said Hussein al-Shahristani, Iraq's oil  minister.

"It gets 100 points, so we can announce that Shell wins the bidding for Majnoon field."

Shell and Petronas had proposed a per-barrel fee of $1.39 and a plateau production target of 1.8 million barrels per day (bpd), compared to the current 46,000.

Soon afterwards, a consortium led by China's CNPC was awarded the contract for the Halfaya oilfield.

The consortium requested fees of $1.40 per barrel of oil extracted and projected that it would produce 535,000 barrels per day from the field, which has proven reserves of 4.1 billion barrels of oil.

Bloody reminder

With a total of 45 firms vying for contracts on 15 oilfields, including three of the world's largest, the deals have the potential to boost Iraq's capacity by millions of barrels per day and make it a rival to top oil producers Saudi Arabia and Russia.

But security remains a key concern and a series of car bombs across Baghdad on Tuesday, which killed 112 people, served as a bloody reminder of the security threats that will face employees of the successful oil firms.

Angolan firm Sonangol had its bid for the Qayara oilfield rejected after it refused to lower its remuneration fee.

It was the only bidder for the field which is in the northern province of Nineveh, where Sunni fighters are known to operate and disputes between Arabs and Kurds have led to considerable tension.

There were no bids recorded for the East Baghdad field, part of which lies under the Sadr City area of the capital. The field has proven reserves of 8.1 billion barrels of oil.

'National duty'

Hussain al-Shahristani, Iraq's oil minister, said that Iraq would find ways to develop oilfields that were not awarded to international oil firms

"The Iraqi oil ministry will develop ... all the fields that were not awarded today with national capabilities," he said.

"This is our national duty and the Oil Ministry's responsibility. We will develop these fields either as a national administration or by other means that will be decided later by the ministry."

The 20-year contracts will give the oil firms, which range from large Western companies to state-owned giants from India and China, access to cheap Middle East oil reserves.

But Iraq too needs the billions of dollars the oil contracts will provide after decades of war and international sanctions.

Nuri al-Maliki, Iraq's prime minister, opened the auction, hailing the transparency with which the bidding was being conducted.

"The old way was in darkened rooms, behind closed doors. But today, it is clear to everyone," he said.

The auction is only the second held since the US-led invasion of Iraq in 2003.

Iraq's first postwar bidding round in June received only lukewarm support as firms balked at the financial provisions imposed by the Iraqi government.

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