Global firms fight over Iraqi oil fields

Iraqi Oil Fields

Today saw the biggest auction for Iraqi oil fields in decades as oil giants from across the globe looked to cash in on the country as it tries to emerge from war and widespread poverty.

Iraqi officials were hoping firms would look beyond persistent security fears and strike deals crucial for the country's reconstruction efforts. Iraqi Prime Minister Nouri al-Maliki, at the start of today's auction, looked to relieve oil executives concerns about the bombings and other incidents that have come to define this oil-rich nation after the 2003 US-led invasion to topple Saddam Hussein.

"There is no security deterioration in Iraq even if a security violation took place here," al-Maliki told officials and company representatives gathered at Iraq's Oil Ministry under extremely tight guard.

Luring major oil companies

However, his hopes of luring a significant number of oil companies with its plentiful oil reserves were met with mixed results. Only two deals were struck as security fears appeared to weigh heavy on the minds of oil executives.

Of the 15 fields on offer in the two-days of bidding, only those located in the relatively stable southern region of Iraq attracted heavy interest, while five located in more restive regions were withdrawn and a sixth field drew only one bid. In all, Iraq offered fields with roughly a third of its 115 billion in proven reserves of crude.

The volatile northern regions surrounding Kirkuk have been the subject of great concern for the Iraqi government and potential investors, as Kurdish extremists continue to make life difficult for those that actually want to see Iraq become an economically and politically stable state.

This comes as a rather sobering message to the Iraqi Prime Minister after his attempts to instill optimism.

Wave of attacks across Baghdad

It was clear, though, that the significance of a wave of attacks across Baghdad earlier this week, which killed at least 127 people, was not lost on executives from the 44 companies participating in the auction. The attacks shook confidence in the abilities of Iraq security forces as US troops depart, as reported by Click2Houston.com.

In the first deal of the day, European oil giant Shell teamed up with Malaysia's state-run Petronas to beat out a consortium grouping France's Total SA and China National Petroleum Corp. to win the southern Majnoon field. The 12.58 billion barrel behemoth in the Basra region was the biggest on offer in the first day of the auction.

The Shell-Petronas consortium will receive $1.39 per barrel produced, and said they would raise production from the current 45,900 barrels per day to 1.8 million barrels per day over a ten-year period. Total and CNPC had asked to receive $1.75 per barrel, while offering to raise production to roughly 1.4 million barrels per day.

More deals to come

The second and final deal of the day was on the 4.1 billion barrel Halfaya field. CNPC, Petronas and Total teamed up on that bid, beating out three other consortiums led by Italy's Eni, Norway's Statoil ASA and India's ONGC.

Under the terms of the deal, CNPC, Petronas and Total will get $1.40 per barrel produced, and said they would raise production from the current 3,100 barrels per day to 535,000 barrels per day over 13 years, according to details released by al-Shahristani.

Although the auction didn't go as hoped, the deals that were struck are absolutely vital to Iraq's future, and add to the deals that were done earlier this year. The country is currently limping along with production at about 2.5 million barrels per day, of which roughly 2 million barrels a day is exported.

Despite the disappointment, analysts say day two of the auction on Saturday, may see another major deal being signed.

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