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More than six years after the US-led invasion of Iraq, American oil companies were notable by their absence from the list of winners in the first really successful auction of Iraqi oilfield development contracts last weekend. Of 10 fields offered, seven were awarded to consortia in which Russian and East Asian companies were prominent, although Angolan state oil company Sonangol notably won two contracts as sole bidder. Of the UK-listed oil companies, Royal Dutch Shell won the contract for the massive Majnoon field, estimated to hold almost 13bn barrels of reserves, in joint venture with Malaysian state oil firm Petronas .
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Having already won the contract for the 7bn-barrel South Rumaila field in June in joint venture with Chinese state oil company CNPC, BP was unsuccessful in the only bid it launched in this round - for the 13bn-barrel West Qurna 2 project. This field went to a consortium of private Russian oil company LUKoil and Norwegian state oil company Statoil. The 9bn-barrel West Qurna 1 project was previously awarded in June to a consortium of US giant ExxonMobil and Shell, while at the same time Italian state oil company ENI and California-based Occidental won the 4bn-barrel Zubair project. These two contracts are the only Iraqi oil deals so far to involve American interests, although, unlike Rumaila, they have yet to be ratified by the Iraqi parliament. The same caveat applies to all the contracts auctioned in this round as well.
Iraqi oil minister Hussain al-Shahristani predicted that the development of these fields will quadruple Iraq's output from its current woeful level of some 2.5m barrels per day over the next seven years, making Iraq the third-largest producer worldwide after Russia and Saudi Arabia. Experts are more circumspect - Peter Jackson of Cambridge Energy Research Associates says: "We think Iraq will be doing well if it can get production up to 6m barrels per day by 2020."
These contracts see the companies develop the fields up to a targeted level of production, in return for which they receive a fixed fee per barrel, after cost reimbursement - for Shell/Petronas on Majnoon, the fee is $1.39 per barrel. This is not lucrative work, and it is also as-yet unclear if the oil in these fields can be booked as reserves for the developers, as these are technically service contracts rather than concession awards. Shell is high enough at 1,767p.
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