Page 5 - MEOG Week 09 2023

MEOG COMMENTARY MEOG

structure deployed in Baghdad’s maiden licens- were all left unawarded.
ing rounds around the turn of the decade. Com-
panies were crucially bidding for a share of the Details divulged
block’s revenue rather than on the basis of a A few days after the deals were signed the MoO
remuneration fee, thus linking returns to inter- provided further details to highlight the differ-
national oil prices. ences between the fifth licensing round and the
Costs and profits were to be paid in crude four previous auctions.
rather than cash, and revenue from oil by-prod- It noted the adoption of “a financial system
ucts is to be excluded from the firms’ income. that guarantees the protection of the Iraqi side’s
revenues from economic risks by adopting the
Disappointment principle of profit as a percentage and not as a
However, the novelty of the terms and the acre- fixed number [… in compliance with previ-
age and the insufficient time given to study them ous budget laws] which stipulate that contracts
combined to deter the majority of the 26 pre- include an equation linking cost recovery to the
qualifiers from bidding and the 14 companies oil price.”
said by the MoO to have purchased the bidding This will see operators share project risk while
documents. The latter group included several “while emphasising the Iraqi people’s ownership
IOCs. of all oil and gas, whether stored underground,
Of these, only Italy’s Eni participated – sub- extracted or sourced, as well as not mortgaging
mitting unsuccessful offers for two blocks. any quantities or ownership rights to any party
Three lesser-known players from the UAE and other than the Iraqi government.”
China between them won all of the six licences The Iraqi state will also receive a 25% royalty,
assigned, while France’s (then) Total, the US’ while Iraqi sub-contractors will be given pref-
ExxonMobil and a Russian trio of Gazprom, erence over their international counterparts in
Lukoil and Zarubezhneft were among those tenders for work associated with 5LR projects.
declining to participate at the last minute.
Upcoming bid round
Winners Meanwhile, Abdulghani’s talk of another bid
Sharjah-based Crescent Petroleum – an affiliate round aligns loosely with details exclusively
of better-known compatriot Dana Gas – was the revealed by Middle East Oil & Gas (MEOG) in
biggest winner, picking up three of the blocks. mid-2021.
Crucially, the company won the licences for At the time, MoO sources told MEOG that
the Gilabat-Qumar and Khashim Ahmer-Injana plans were underway for a licensing round
non-associated gas fields in Diyala Province, focused on increasing flows of free gas, while
close to the Iranian frontier with bids based on direct talks would be held with IOCs for explo-
profit shares of 9.21% and 19.99% respectively. ration concessions in the south-east of the coun-
These are expected to produce 250mn cubic feet try. A few months later, the ill-fated Iraq National
(7 mcm) per day Oil Co. (INOC) was been given permission to
Crescent was also awarded the Khudr al-Maa “negotiate directly” with Chevron for the devel-
oil block, straddling the Basra and Mathana opment of four exploration blocks around
provinces on the Kuwaiti border, with an offer Nasiriyah in Dhi Qar Governorate.
of 13.75%. One source said that the four exploration
China’s Geo-Jade Petroleum Corp. won two blocks in question were: Area A (between Nasiri-
oil blocks – Naft Khana in Diyala with a bid yah and Block 10); Area B (between Nasiriyah
of 14.67% and Huwaiza in Maysan for 7.15%. and Gharraf); Area D (east of Nasiriyah) and
Compatriot United Energy Group – operator Area E, which covers the marshlands of Dhi
of the Faihaa and Siba assets – was awarded Qar. He added that a minimum production rate
the contract for the Sindbad block in the east of of 250,000 bpd was being targeted.
Basra Province near Iran on the basis of a pro- Meanwhile, the sixth bidding round is likely
posed 4.55% profit share. to focus on new concessions for gas E&P, Euro-
Meanwhile, Zurbatiya (in Wasit and Diyala), pean and US majors and Saudi Aramco are
Shihabi (in Maysan and Wasit), Fao (in Basra), understood to remain interested in developing
Jebel Sanam (in Basra) and an offshore block the Akkas and Mansouriyah gas fields.™

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