Iraq round show of no hands

Empty seats: representatives of international oil companies at the first day of round bidding in Baghdad on Wednesday

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.

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