Iraq rejects all but BP Rumaila bid

Iraq today approved a contract for BP and China National Petroleum Corporation to expand its massive Rumaila oilfield but rejected other bids for deals it had hoped would revive its struggling oil and gas sector.



The cabinet refused offers for several further fields submitted by other foreign companies, some of which had been revised after a major tender yesterday.

It was unclear if the cabinet decision was the final word on the country's first major energy auction since the US-led invasion in 2003.

BP and the CNPC were the only consortium to walk away with a deal when they won the right to work on Rumaila, Iraq's biggest producing oilfield with reserves of 17 billion barrels.

The British oil major and its Chinese partner sealed the deal only after an ExxonMobil-led group had dropped out of the running.

BP and CNPC agreed to a cut-price fee of just $2 for every extra barrel of oil produced from Rumaila.

They had originally sought twice that amount.

"The cabinet approved the bid submitted by the consortium led by BP to develop Rumaila ... It will boost output from current levels of 950,000 barrels per day to 2.85 million bpd in return for $2 for each additional barrel produced," government spokesman Ali al-Dabbagh told Reuters.

"The cabinet rejected the other bids offered by companies because they did not lower the remuneration fee," he said.

The sale of contracts yesterday to develop six large oilfields and two undeveloped gas fields was a central plank in Iraq's plans to more than double lacklustre oil output of around 2.4 million barrels per day.

Dependent on oil for more than 95% of state income, Iraq needs money to rebuild after six years of bloodshed.

It also needs the capital and expertise that foreign companies can bring to repair damage to its oil infrastructure caused by decades of war, sanctions and neglect.

The auction largely flopped, however, when international oil companies balked at the low fees Iraq was willing to pay them for boosting crude output.

Rumaila was the only field on which an agreement was reached.

Some of the bidders submitted revised bids last night that were not made public. Those revised bids were presented to the cabinet today Wednesday, Oil Ministry officials said.

User

Become an Upstream member!

Membership includes a subscription to our weekly newspaper providing in-depth news from the energy industry, plus full-access to this site and its archives. Still not convinced? Try our free trial.

Already a member?

Login