This news today from Wall Street Journal:
BAGHDAD (Dow Jones)–A consortium of BP PLC (BP.LN) and China’s CNPC Tuesday won the contract for Rumaila oil field – the largest oil field in Iraq and one of the largest in the world, the Iraqi Oil Minister Hussain al-Shahristani said. The consortium had been seeking $3.99 remuneration for each extra barrel of oil produced but after last-minute negotiations Tuesday morning accepted the Oil Ministry’s terms of $2 a barrel. The companies had bid to increase output in Rumaila to 2.8 million barrels a day. The field is currently producing 1.1 million barrels a day and is estimated to have reserves of around 17 billion barrels.
This is the first contract awarded in Iraq’s first oil and gas field tender open to international companies in nearly three decades. -By Hassan Hafidh, Dow Jones Newswires
Few of the readers of this blog recall the 100,000 troops from China who assisted the United States in holding down the violence in Iraq during recent years. Readers don’t remember because there are no troops to recall, no aid for the cause, but now they reap the profits.
Oddly, the Chinese and British Petroleum (BP) were willing to accept less than a few dollars a barrel in payments, while U.S. oil companies were looking to get in the mid $20s. Sounds like American oil companies were way too greedy in their demands. What were they thinking with such ripoff bids? They must have thought they were bidding for rights in U.S. national parks or offshore.
In reviewing the fact that most bids were refused for oil development today (except BP and China) there is an interesting analysis from the Houston Post, in a town where oil firms are divine:
As much the licensing round’s cheerleader and key driver, al-Shahristani has also been its scapegoat. His critics have pointed to Iraq’s inability to even reach its prewar production levels as evidence that he has failed in his job. Others gripe that the bidding round will open the door for an economic occupation of the country at a time when it is pulling away from the U.S. military presence that many in Iraq likened to military occupation.
The poor showing could further strengthen critics’ arguments that he put too much emphasis on the bidding round while ignoring easy repairs to the sector that could have been carried out over the past couple of years.
The minister, however, has insisted he was working for the country’s best interest.
Iraqi officials have estimated that based on crude oil at $50 per barrel, the companies could earn around $16 billion in total. Iraq, meanwhile, would get over $1.7 trillion. As part of the contracts, the companies have to provide so-called “soft-loan” signature bonuses to the government that total about $2.6 billion.
The company response to the bidding sends a clear signal to Iraq, said analysts.
It says “the companies will still be there, but they’ve made it clear what their baseline is, and that they can’t go into the red even to get access to Iraqi oil,” said Ciszuk. “The risks are just too great.”