Iraq on Wednesday put up for sale a dozen oil and gas exploration blocks at the start of a two-day auction it hopes will boost its reserves and strengthen its position as a key producer.
The sale, the fourth such auction to be organized by Iraq since mid-2009, comes as the country ramps up its oil exports, which account for the vast majority of government income, and looks to boost gas production to increase woefully inadequate electricity output.
But unlike the three previous sales, which offered contracts to foreign energy firms to boost output at existing oil and gas fields, Iraq will this time be showcasing acreage earmarked for exploration.
“This competition is transparent and public,” Oil Minister Abdelkarim al-Luaybi said in remarks to open the auction.
“Many qualified companies will participate. The round is considered very important for the ministry and the country to develop and improve the economy.”
The exploration blocks include seven which are thought to hold gas and five that are believed to hold oil. In all, 47 companies have pre-qualified to bid.
Six blocks will be auctioned on Wednesday, with another six on Thursday.
All companies will be required to publicly reveal their offers for each exploration block they bid for, and the oil ministry is obliged to accept the lowest-price offer, regardless of the company or consortium that submits it, so long as it is below a preset maximum agreed by the ministry.
As in previous auctions, Iraq will require foreign firms that agree to explore the blocks to work under fixed-price service contracts, rather than production-sharing agreements that are common elsewhere and more popular with major international energy firms.
Baghdad is also now mandating that firms that win contracts agree not to sign deals with the autonomous Kurdish region, or any other sub-national authority, without the central government’s approval, according to the head of the oil ministry’s petroleum contracts and licensing department.
The new requirement comes with Baghdad and Kurdish authorities in Arbil at loggerheads over dispersal of oil revenues, and with an oil and gas law that would regulate the sector still languishing in parliament.
Crucially, ExxonMobil, which has a contract to increase output at one of Iraq’s biggest oil fields, will not be taking part in the auction, after Baghdad barred the US energy giant for having signed a deal with the Kurdish region without the central government’s go-ahead.
Kurdistan has signed dozens of contracts with foreign energy firms, but Baghdad regards them as illegal because they were not approved by the federal oil ministry.
Crude sales account for the vast majority of Iraq’s government revenue, and two-thirds of its gross domestic product, and the country is looking to ramp up its exports in the coming years from its current level of around 2.5 million barrels per day (bpd).
Iraq has proven reserves of 143.1 billion barrels of oil and 3.2 trillion cubic meters (111.9 trillion cubic feet) of gas, both of which are among the highest such deposits in the world.