Tough contract terms hurt Iraq’s oil blocks auction

(ARAB TIMES) A landmark Iraqi auction for oil and gas exploration blocks was a disappointment because of poor contract terms on offer and a lack of requisite energy infrastructure, analysts say. The May 30-31 auction, the fourth of its kind to be organised by Baghdad in the past three years and the first to offer acreage for oil and gas exploration since the 2003 US-led invasion, ended with just three deals awarded out of 12 blocks on offer, and eight plots receiving no bids whatsoever.

The auction was based on risk service contracts. Picture credit Darwinek.

Iraq’s oil ministry painted the bid round as a success, with one official arguing that a success rate of 25 percent was a “good result.” Analysts, however, disagreed. “It was not a success,” said Ruba Husari, editor of iraqoilforum.com. “It was not a success because the main aim of Bid Round Four was to find gas and develop it.” Husari pointed to two key obstacles — poor energy infrastructure in many of the exploration areas, particularly in Iraq’s western desert which is thought to hold gas; and contract terms that required firms to specify how much money they wanted to receive, without knowing how much energy was in the blocks.

Read full article in the ARAB TIMES