Shell-Petronas consortium win bid for large southern oil field at auction

Iraq reached agreement with energy giants Shell and Petronas Friday for a massive southern oil field, part of a two-day auction that seeks to dramatically boost the country's crude output.

AFP - Iraq reached agreement with energy giants Shell and Petronas Friday for a massive southern oil field, part of a two-day auction that seeks to dramatically boost the country's crude output.
  
The successful bid from the Anglo-Dutch and Malaysian consortium kicked off the bid round, which aims to catapult Iraq towards the top of the list of the world's oil producers and bring in much-needed revenues to rebuild the country.
  
"The price that the consortium offered is a little bit less than the price offered by the oil ministry," Shahristani said.
  
"It gets 100 points, so we can announce that Shell wins the bidding for Majnoon."
  
The two companies requested fees of 1.39 dollars per barrel of oil extracted from the field, and projected that they would produce 1.8 million barrels per day.
  
The project will be split 60 percent for Shell and 40 percent for Petronas.
  
Majnoon, a giant oilfield in southern Iraq near the border with Iran, currently produces 45,900 barrels of oil per day (bpd) and has proven reserves of 12.58 billion barrels.
  
The Shell-Petronas bid beat a competing offer from French energy giant Total and Chinese firm CNPC, which offered 1.75 dollars per barrel, with promised production of 1.405 million bpd.
  
Iraq relies massively on oil sales for its economic growth and government income, and it will be hoping the auction, the second such sale since June, generates positive headlines ahead of a parliamentary election scheduled for March 7.
  
"The second round represents a new era in the history of the Iraqi oil industry," Prime Minister Nuri al-Maliki said as he opened the auction.
  
He hailed the transparent fashion in which the bid round was being conducted, saying it was "very important because many international companies are participating, in public and on television."
  
"The old way was in darkened rooms, behind closed doors. But today, it is clear to everyone," Maliki said.
  
The biggest oil fields on offer in the bid round are Majnoon and West Qurna-2, the latter of which has proven reserves of 12.9 billion barrels of oil.
  
Among the 44 companies involved are energy giants BP, ExxonMobil, Chevron, Total and Shell, along with an array of Chinese and Indian firms, a sign of the Asian giants' growing hunger for natural resources.
  
Successful companies will be paid a fixed fee per barrel, not a share of the profits, and it will only be paid once an agreed production threshold has been reached.
  
The auction was being conducted in a large hall at the oil ministry, with separate areas marked out for bidding firms, government officials and other guests.
  
A tight security perimeter surrounded the ministry offices, with some attendees having to abandon their cars around two kilometres (1.25 miles) away and walk the remaining distance.
  
All participants were subjected to multiple checks before being allowed to enter.
  
The auction was dealing with one field at a time -- five on Friday and five on Saturday.
  
Bidders submitted their offers which were then assigned a score, depending on the fee per barrel each firm sought and the output it said it could produce from the field.
  
The firm with the highest score then had its fee compared to the maximum fee the ministry is willing to pay. If the bid is above the ceiling, the firm has 30 minutes to decide whether or not to lower its offer.
  
The auction came just three days after five co-ordinated bombings struck Baghdad, mostly targeting government ministries, the third such attack since August.
  
Bombers have also repeatedly hit Iraq's oil infrastructure, most recently sabotaging the main export pipeline from northern Iraq to the Turkish Mediterranean port of Ceyhan in November.
  
In the first bid round in June, only one deal was reached -- with Britain's BP and China's CNPC -- because of the perceived low return on investment being offered by the Iraqi government.
  
Since then, however, two other foreign consortiums have agreed to the tough terms and signed agreements with Baghdad, which wants to boost its oil production to seven million barrels per day (bpd) within six years, from the current level of 2.5 million.
  
In the longer term, the country is targeting 10 to 12 million bpd, which would rival Saudi Arabia in terms of overall output.
  
At 115 billion barrels, Iraq has the world's third-largest proven oil reserves, behind only Saudi Arabia and Iran. Oil sales provide 85 percent of government revenues.

Date created : 2009-12-11