Iraq Sweetens Terms for Oilfield Development

Rigzone: Iraq is sweetening the terms for companies bidding for its prized oil fields as it attempts to avoid the failure of the first bidding round — and it appears Monday to be working.

After only one project out of a possible eight was awarded in the first auction in June, the Iraqi oil ministry is now showing foreign companies, including the world’s majors, more flexibility. It has also improved terms for international oil companies that submitted offers at the country’s first licensing auction, but didn’t win contracts.

As a result, a line of bidders is forming for the remaining assets. The new ministry’s policy has convinced a number of companies to re-negotiate West Qurna-1 and Zubair, which Baghdad failed to award during the first auction.

My comment: This is good news and it is also what I expected to happen. The government in Iraq is desperate for revenue and the first round of bidding did not go very well for the government. They sweetened the pot and now there will be the investment I have been anticipating. This is good news for people like me who have been early investors in this frontier market. With western oilfield technology applied to these fields I expect production to increase fairly quickly. The other thing I would note is that I was home watching CNBC today as I am sick with the flu. CNBC had a whole segment on hedge funds and investment funds getting set up to enter the Iraq stockmarket. It was mentioned that the Iraqi stockmarket has a total market cap of only two billion dollars. The one manager interviewed echoed my previous sentiments. he said that frontier markets like Iraq have the opportunity to create life changing wealth as the market doubles several times over as investment floods into the country. Big risk and big reward.

John Polomny
The Real Deal