Iraq oil 'auction' a bust
The Iraqi government stumbled once again on Tuesday in its frequently delayed effort to award development rights to its most valuable oil fields. In a public auction it largely failed to attract the lucrative offers it sought from dozens of international oil firms invited to the bidding.Deal again?
After the day long event, which was broadcast live on national television, the government came away with just a single deal struck from among the six giant oil fields and two gas fields it had put up for bid.The single successful contract went to a pairing of BP and the China National Petroleum Corporation for the largest field on offer: Rumaila, near the southern city of Basra, which has proven reserves of 17 billion barrels.
“It was successful in the sense that the Oil Ministry set a price and said, ‘You can take it or leave it,’ and did not give oil fields to oil companies at any price,” said Ruba Husari, editor of the Iraqi Forum Web site, which covers the country’s oil industry. “But they are in desperate need for the companies to help them increase production and so it leaves unanswered a big question: What are they going to do now?”
There is a market for the services they are seeking, but it appears the Iraqis are not willing to pay that price. At some point in the future they may change their mind, or the companies my find a way to perform the services profitably at a lower price. My speculation is that the latter is unlikely. Iraq is going to have to demonstrate much more stability and security to get a better deal.