Iraq awarded only one out of six new oil and gas blocks to foreign companies on Wednesday in the first day of bidding in its fourth licensing round as oil companies were turned off by tough contract terms, according to a report.
Foreign players made no offers on four oil and gas blocks
and a group led by UK-based Premier Oil rejected a government offer on the fee
for a fifth block, scuttling an agreement there, Reuters reported.
The only tract to be awarded was Block 9, a mainly oil area
in southern Basra province, which was secured by a consortium led by Kuwait
Energy and partners Turkey's TPAO and Dubai-based Dragon Oil.
Officials and executives said economics of service contracts
on offer, especially on gas deals, kept companies away.
“We believe the contracts.. serve the interests of the
companies and Iraq. But they have a different view,” said Abdul-Mahdy
al-Ameedi, director of the Oil Ministry's Petroleum Contracts & Licensing Directorate.
“That is why only one block was awarded.”
Another six blocks were scheduled to go up for auction on
Thursday, alongside at least of the two blocks initially rejected on Wednesday.
Iraq had eased the terms on the service contracts in an
attempt to lure interest, but companies are generally more wary of service
agreements - where they are paid a fee - rather than production sharing deals
that allow them to profit jointly from output.
“With tough gas contract terms, and all the other risks
around these blocks, we don't expect much interest from companies," said
one senior company executive involved in the bidding, who asked not to be
identified because of the sensitive nature of the negotiations.