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Iraq set to hold new licensing auction in 2013

Oilfield Technology,

A spokesman for the Iraqi government has confirmed that the country will hold a fifth oil and gas licensing round in early 2013 with improved contract terms designed to encourage more bidders.

Iraq’s fourth licensing round was widely hailed as a flop as only 3 out of 12 blocks were successfully auctioned and many major companies decided against taking part because of unfavourable contract terms. An issue of particular contention was that the contracts stipulated a flat fee per barrel of hydrocarbons produced, rather than the provision of a share of whatever resources were discovered.

Thamir Ghadhban, a senior energy advisor to the Iraqi prime minister hinted at a possible relaxing of the contracts, “For example, instead of determining the fee before the discovery, it can be discussed and agreed upon after the company makes a hydrocarbon discovery.”

Another major issue that reportedly deterred several oil majors from investing was the newly introduced clause that forbade signees from signing further contracts with the Kurdistan Regional Government (KRG). Iraq’s central government, based in Baghdad and the KRG have been involved in a lengthy dispute over the KRG’s supposed right to sign contracts without Baghdad’s permission. Exxon Mobil was barred by the Baghdad government from participating in the fourth licensing round as a result of the company’s signing of a contract with the KRG.

According to Reuters, Ghadhban made no comment about this clause. However, it remains unlikely that it will be removed as this would come at a significant political cost to the Baghdad regime.

Edited from various sources by David Bizley

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