Finally, slowly but surely the oil majors are getting what they want in Iraq.
Forced into action over the low oil price, Iraq’s government is proposing to give foreign oil companies a majority stake in projects developing oil and gas fields. The Iraqis are also offering further new fields for development to foreign firms, which are outside the current bidding rounds.
The Iraqi government has now admitted that foreign companies could bid for as much as 75 percent of the profit from new oil and natural gas development projects, up from the previous limit of 49 per cent.
Iraq’s oil minister, Hussain al-Shahristani, who was attending an OPEC meeting in Vienna, said that Iraq would be open to bids from such companies as Exxon Mobil and Royal Dutch Shell for 75 percent stakes in new development projects. This move is bound to cause controversy and add to tensions around the country’s controversial oil law.
Iraq is also offering new and existing fields for development by foreign oil companies, outside of the formal bidding rounds for new fields, which had previously been open to only a small number of major oil companies.
For example, on Wednesday this week, the Iraqi Oil Ministry invited bids for digging 30 new wells in three major southern oil fields, including the Halfaya field, which is classified as “super giant” and has five billion barrels of proven reserves. Those bids are due in only a month and clearly fall outside of the existing bid rounds.
Deputy Prime Minister Barham Salih, who led an Iraqi government review on reforming the oil sector, said that giving foreign companies more incentives was long overdue. “It’s acknowledged almost universally that the present oil policy and management has been a disaster,” Mr. Salih said. The review of oil policy, which was completed at the beginning of this month, has called for rethinking the ban on production-sharing agreements and giving the oil companies more stake in profits. “The status quo is unacceptable,” Mr. Salih said.
That will be music to the ears of the oil multinationals, who are beginning to win their power struggle with the Iraqi government.