Iraq 4th Bidding Round: New Opportunities for IOCs

Iraq is one of the few countries where a high volume of reserves remains yet resources have vastly been under exploited. Although Iraq ranks highly as an oil producer, major fields are yet to reach their expected peak production rates and only a few fields are in development.  In early 2011, the Iraq Oil Ministry announced a fourth licensing round. Included in the round are twelve licenses that were not previously on offer in the provinces of Najaf, Karbala, Samawa, Diwaniya and Anbar. The fourth license round is on track with the ministry’s plan to pursue unexploited reserves. Development of infrastructure will be needed in order for Iraq to achieve a target production capacity of almost 12 million b/d by 2017. 

The Iraq oil industry has of course been heavily hit by U.S sanctions, war and weak infrastructure. At the end of 2010, the United States voted to lift sanctions against Iraq opening the country up to foreign investment. The last few years have seen the Iraq Oil Ministry pursue an ambitious development program to develop fields and increase production. There have been three license rounds in Iraq since 2008 and twelve contracts were signed with International Companies (IOCs). A two phased development is being pursued in which current producing fields are being developed to maximize their potential, followed by the development of non-producing fields. 

Megaprojects 

Terms of the contracts on offer by the Iraq Oil Ministry are by no means favourable (service contracts in which companies earn a fee for each barrel of oil produced) but the appeal of high prospective reserves has so far held the interest of IOCs. The first phase to boost current production sees the involvement of various IOCs in three major fields. The table below shows a list of the fields awarded in June 2009, ownership, remaining reserves, current production, and the 2017 expected crude production capacity. 

The Rumalia, West Qurna Phase 1 and Zubair fields all contain a high level of reserves but are not yet being exploited to their full capacity. The Iraq Oil Ministry has enlisted IOCs to boost production at these major fields.  The second phase of Iraqi oil development aims to generate production from future major oil fields. Concessions were awarded for seven fields out of ten on offer in December 2009. A list of major fields with International Oil Companies involved is provided in the table below. 

The fourth bid round has on offer licenses over twelve exploration areas. Companies that can participate in the round are IOCs that qualified for the previous three rounds, whether a contract was signed or not. Companies that have not previously bid for Iraqi licenses will apply through a new prequalification process announced by the Ministry. The areas on offer have not previously been explored but are part of the Ministry’s plan to optimize Iraq’s resources. The blocks on offer are in the table below: 

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Iraq’s Oil Future 

A push by the Iraq Oil Ministry to promote oil production shows Iraq’s determination to become major oil producing nation. With a vast amount of resources, a push to exploit major oil fields and interest from international companies, Iraq is heading in the right direction to reaching its 2017 production target. But before Iraq can reach this success, many challenges lie ahead. A history of wars and violence has left the infrastructure weak and in need of modernization and investment. Estimations on the reconstruction of Iraq’s infrastructure are as high as $100 billion (Source: EIA). Furthermore, tensions within Iraq as well as with neighbouring countries mean that companies will have to invest in heavy security, a costly and logistical nightmare. Extensive repair work is also required on existing fields that have been damaged in conflict and through poor management.  

Companies that have invested so far in Iraq have shown that the rewards outweigh the risk. Even the unfavourable no-bid deals whereby companies are paid for their work rather than entering into a production agreement, are being signed as companies see this as a way of establishing themselves with the ministry.  Companies that have previously bid for contracts, pre-qualify for the fourth licensing round. The fourth licensing round will close on May 19th, 2011. Pre-qualified firms will be announced in June, with further details on the acreage to be provided to bidders in August (Source: Evaluate Energy). IOCs have once again shown a keen interest in Iraq with the fourth bid round. 

Evaluate Energy tracks all Licensing rounds worldwide at www.evaluateenergy.com