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Iraq Improves Terms of 4th Round Energy Auction

Iraq Improves Terms of 4th Round Energy Auction

Iraq has reportedly made “favourable” changes to some of the terms of the 20-year technical service contracts offered under the 4th energy licensing round.

International companies have been invited to compete for the rights to explore for oil and gas in 12 blocks to be auctioned in May.

According to Dow Jones, the most important change to the original model contract is that international firms would have 100% stake in the projects, up from the 75% stake initially proposed, with state-owned Iraqi companies holding none.

This would allow faster cost recovery as the companies will have bigger shares of the discovered and produced oil and gas output.

Oil and gas companies such as France’s Total had expressed concern that the potential rewards of the contracts were not enough to compensate for the risks.

The Iraqi oil ministry is expected to meet its advisors, the U.K.-based Gaffney, Cline & Associates, in Istanbul in March to finalize the draft model contract before handing it to companies in April.

An unidentified source said the ministry has changed a provision that allowed the Iraq ministry to postpone development of fields, to a period of up to seven years from the date of the announcement of commercial discovery, which was mentioned in the previous model contract and was one the terms disliked by potential bidders.

“In case of oil discovery and the Iraqi government decides to put on hold development of the field, contractors are liable to reimburse costs of appraisal and exploration plus interest at Libor +3% during the years that the development is on hold,” the source said.

In the previous draft contract, contractors were not liable for such interests.

“For special costs which include de-mining, building roads, etc, contractors are liable to receive interest at Libor +5% during the years that development of fields is on hold,” he added.

Nine companies are believed to have dropped out of the fourth bidding round but Iraq expected a good number of bids from the 37 firms still in the race, oil ministry officials had previously said.

(Source: Dow Jones)

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4 Responses to “Iraq Improves Terms of 4th Round Energy Auction”

  1. Ahmed Mousa Jiyad says:

    As usual, imperfect generalities and selectivity without thoroughly reviewing the related provisions in the Model contract for the bid round, are reported and repeated .
    The information provided during Amman’ Roadshow of 11 September 2011 on this exploration bid round , and the Model Contract sent by the Ministry of Oil to the Iraqi Parliament this February are so elaborated and give clearer and more accurate picture than what has been reported by DJ, and reproduced by IBN .

    Ahmed Mousa Jiyad,
    Iraq/ Development Consultancy and Research
    Norway.
    mou-jiya@online.no
    22 Feb 2012

  2. Re da Caste says:

    I notice you keep removing my comments from this site. I understand freedom of speach is not a major issue for iraq and specially not for the iraq-business web site that uncritically supports Maliki and Shahristanis policies. But there are much better choices…

  3. Editor says:

    @ Re da Caste: Iraq Business News is not aligned to any political party and has been critical of government where appropriate. Some of your comments were removed/edited due to offensive language. You are welcome to comment on our website, but please keep it civil.

    - Editor

  4. Re da Caste says:

    What is “civil”? Where I live it’s civil for women to sunbathe out in the beaches top-less; men gather together to have a sauna completely naked; our daughters have the right to have sexual relations when they are 15 and above; all our children will question their parents opinions and ideas without fear; corporal punishment of children (and wife!) as a mean of “education” is forbidden by law; we feel it’s civil that women and men have equal possibilities home, out in the society and in work or business. Dead penalty is not civil for us either. The use of the “F”-word I admit is a bit on the border in my culture, but if you got to the US it has become part of the common talking.


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