Tuesday, June 30, 2009

Meanwhile in the Oil Business

[Iraq's] Parliament has not yet passed an oil bill. Some observers have suggested that the decision to award service contracts, instead of the more common production-sharing contracts, was taken to make it easier to proceed without such a bill being passed.

Under a production-sharing contract, an oil company would recoup its costs and then be entitled to a proportion of the oil extracted, instead of being paid a fixed fee for each barrel.


Only one of the bidders for the eight contracts to run oil and gas fields in Iraq has accepted oil ministry terms.

Six oil fields and two gas fields were available in a televised auction that was the first big oil tender in Iraq since the invasion of 2003.


The auction was originally planned for Monday, but had to be delayed because of sandstorms in Baghdad.


BP and China's CNPC agreed to run the 17 billion barrel Rumaila field after Exxon Mobil turned it down.

Iraq has asked the rest of the companies to consider resubmitting bids for the other seven contracts.

The oil ministry is offering 20-year service contracts.

Other fields have failed to find buyers, either because there were no bidders or because terms were declined.


In the case of the Rumaila field, Exxon Mobil declined to accept the ministry's maximum payment, but BP and CNPC, which had originally asked for $4 a barrel, agreed to do the work for $2 a barrel.

They will also be able to charge the ministry for the costs of the work they have to do on the production facilities.

The contracts are subject to approval by the cabinet.

Other winning bidders declined to accept the ministry's maximum payments.


....but hey, do what you want....you will anyway.

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