Iraq’s 4th Energy Licensing Round – Success or Failure?

Nearly a week has passed since the finalisation of Iraq’s fourth round of oil licences, this time relating to oil and gas exploration blocks.

In the meantime, the debate has rumbled on regarding the results of the auction, with some regarding it as a success and others as a failure.

Among the professionals, the consensus is very much that the process was a disappointment as it failed to secure exploration agreements for nine of the twelve blocks on offer:

The Iraqis are working with a service contract model that is not conducive with exploration … It works with a discovered resource basis, it works with proven reserves.

— Alex Munton, analyst at Wood Mackenzie.

The drawbacks were the conditions, as they were only pure service contracts, so they did not have upside potential if they found a big field.

— Manouchehr Takin, analyst at the Centre for Global Energy Studies.

It was not a success because the main aim of Bid Round Four was to find gas and develop it … Until you drill, and make a discovery and you appraise that discovery, and until it is declared commercial, you cannot tell how much you want to be paid for that, to make the project feasible … you cannot monetise the discovery because you will only start receiving remuneration once you start producing, and you cannot produce if this infrastructure is not ready.

— Ruba Husari, of Iraq Oil Forum.

Against this we have the comments of Abdul Mahdi Al Ameedi, director of the oil ministry’s Petroleum Contracts and Licensing Directorate (PCLD), which ran the auction:

We believe the contracts serve the interests of the companies and Iraq. But they have a different view … With the three contracts today, there are 18 contracts ongoing across the country — this is a huge task for the country.

So which is it?

As the Ministry of Oil starts preparing for the fifth round of energy licences, why not voice your opinion in the comments section below.

3 Responses to Iraq’s 4th Energy Licensing Round – Success or Failure?

  1. Baroness Nicholson of Winterbourne June 7, 2012 at 3:16 pm #

    I was fortunate enough to attend the 4th round auction in Baghdad and although the overall result may have been a qualified success for the Iraqi Government and oil companies, the Oil Ministry, headed by AbdulKarim al-Louyabi, should be highly praised for the thoroughly professional way the auction proceedings were conducted.

    Mr Al-Louyabi’s ministry clearly made a great effort to demonstrate the process was transparent and fair.

    A huge theatre inside the ministry building was made available with translators providing a simultaneous service. The two day event was shown live on Iraqi television.

    As the bids went in we watched as envelopes were deposited in a clear plastic box. Later paperwork showing how much the bidding oil companies were prepared to pay per barrel were projected on giant screens for all to see.

    I was very impressed by the professional way the process was handled, the event proving a huge organisational credit to Mr Al-Louyabi and his ministry officials.

    Baroness Nicholson of Winterbourne
    Executive Chairman, Iraq Britain Business Council

  2. Uruki-the-Iraqi June 8, 2012 at 2:41 am #

    Iraq is not the only country with vast oil & gas reserves in the Middle East, NO thanks to the USA nor the UK for that, and do not be fooled for the false liberation plots since 2003! If someone wants to question Iraq’s current O&G energy licensing rounds and label it success or failure rounds, one would also question how other big oil producing countries in the region, who have signed in the past similar energy contracts before Iraq?? Namely speaking: can we examine Saudi Arabia, Qatar, UAE, Kuwait and the other OPEC members in the region (aside from Iran) and compare them to Iraq’s rounds?? … How are these contracts since the 1970s different than Iraq’s current four successful rounds? (Whether they were PSCs or Service contracts?) … Those of you (the so-called experts here) who continue to praise Kurdistan’s PSC as a good model keep forgetting that those contracts do not serve the interests of ALL the rest of Iraqis (but only serve the interests of few clan members within the Kurdistan Regional Government) and keep forgetting a national consensus must first be put on the election ballots and ratified and passed (unanimously) by the Iraqis prior to anyone authorizing such unattractive deals (PSC) that serve the interests of IOCs, and most definitely do not serve that of the Iraqi people!

  3. Re da Caste June 9, 2012 at 12:37 am #

    Hilarious to read some of the observations. First a comment from a director of the oil ministry’s PCLD, a person with very “neutral” opinion in this context… Then a british baroness that says what should be obvious in every democratic country. The last comment and the discussion whether choose PSCs or Service contracts seems a bit outplayed. What I understand the people in Kurdistan are getting a bigger share of the oil money then the people in south. Besides, nobody knows how much SOMO is getting for the oil exported. This info is confidencial!! I’m pretty sure the oil minister Luabi and Shahristani will have to adapt the service contracts to become much more like the conditions in PCSs, if they want the major players to bid in the future. Of course they will keep calling them for service contracts. But I’m more certain that the Kurds will follow their path, either with Baghdad acceptande or without. And soon they will be exporting their own oil via Turkey and became completely independent of Baghdad. This is an irreversibel fact! PSC is the standard contract all over the world- it means you share profits and also risks. In Service contracts the oil companies take the risks and the gvnmt takes the profits. Who can accept that?