August 1, 2010 / 1:52 PM / 9 years ago

Iraq delays gas bidding round to Oct 1

ISTANBUL (Reuters) - Iraq has pushed back by a month the date of an auction for international firms that want to develop three of its gas fields, company executives and Iraqi oil officials said on Sunday.

Baghdad had said it will invite all 45 international companies which were prequalified in the two oil auctions last year to bid for Akkas field in the western desert, Siba in the southern hub of Basra and Mansuriyah in eastern Iraq.

The auction was to have taken place on Sept. 1 but will now be on Oct. 1, oil ministry officials said on condition they were not identified.

The ministry is holding a workshop for interested bidders in Istanbul on Sunday and Monday to discuss details of the gas bidding round and contract terms. The ministry had said it was considering postponing the gas auction to give companies more time.

Companies heard at the workshop that the Iraqi government would commit to purchasing half of the gas produced at the fields, while the other half would be for export, a senior Iraqi oil official said, speaking on condition of anonymity.

The government would seek companies’ “help” in finding export markets, he said.

One executive with an oil company that may bid for a field said the delay may still not be enough time for potential bidders to come up with customers and export routes, as Iraq lacks sufficient infrastructure to send gas across borders.

“It’s not clear how much gas is needed to justify a viable export route,” the executive said, declining to be named. “There are questions about how much new infrastructure is required and who will build it ... With these new terms, two months is definitely not enough time to come up with the structures.”

Other company officials said the one-month delay was not a problem. Executives were also mixed on whether the lack of a new Iraqi government would deter interest in the tender.

Iraq has had no new government since a March election produced no outright winner. Many Iraqi politicians have said it could be mid-September or later before a government is formed.

Foreign companies will not need to pay the Iraqi government signature bonuses for the gas fields, another Iraqi oil official said, as Iraq is trying to lure international companies to bid by creating new incentives in its contract terms.

Companies that won contracts to develop Iraq’s oil fields last year had to pay signing fees of at least $100 million.

The contracts for the gas fields are expected to be service agreements similar to those given in the oil auctions, but the terms have yet to be finalised.

At the bidding round, companies will propose remuneration fees and plateau production targets. State energy companies may take a 25 percent stake in ventures to develop the fields, said an official from a company that may participate in the tender.

Officials from Total of France, Italy’s Edison, South Korea’s KOGAS, India’s Oil & Natural Gas Corp (ONGC.BO), Japan Oil, Gas and Metals National Corp (JOGMEC) and Itochu Corp attended the workshop.

Russia’s TNK-BP, half-owned by BP, privately held Kuwait Energy, Turkey’s state-run TPAO and Kazakh KazMunaiGaz were also represented at the workshop.

Iraq has said companies like Total, Royal Dutch Shell and KOGAS are favoured because of their experience.

Two of the gas fields to be tendered — the 2.1 trillion cubic feet Akkas field, and Mansuriyah with estimated reserves of 3.3 trillion cubic feet of gas — were unsuccessfully put on the auction block last year.

The third field — Siba — had initially been included in Iraq’s second oilfield auction but was taken off the list of reservoirs on offer because the ministry decided it was small enough for Iraq to develop on its own.

Starved of electricity after years of war, sanctions and economic decline, Iraq hopes opening its gas sector to foreign investment and sealing a gas capture deal with Shell will boost its power capacity. Seven years after the U.S.-led invasion the national grid only supplies a few hours of power each day.

Writing by Rania El Gamal; Editing by Michael Shields

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