Wednesday, March 30, 2011

Iraq Plans Fourth Bidding Round On Oil And Natural Gas Fields

On March 20, 2011 a spokesman for Iraq’s Oil Ministry announced that it was making plans to conduct a fourth auction for petroleum and natural gas fields in November. The licensing round is supposed to include 12 underdeveloped blocks in Najaf, Karbala, Muthanna, Qadisiyah, and Anbar. Oil Minister Abdul Karim Luaibi said that 70% of the fields would only contain natural gas, with a total of 29 trillion cubic feet of reserves, and the rest would have both oil and gas. The Ministry is hoping that developing these areas will help provide fuel for the country’s power stations. Many of Iraq’s electrical turbines are supposed to be run off of gas, but because of shortages use heavy fuel oil instead, which wrecks the equipment. While Iraq has been successful recently in developing its oil industry, it has run into a series of problems with natural gas.

The Oil Ministry has been negotiating with foreign firms since 2008 to develop the country’s natural resources. From 2009 to 2010 it held two oil auctions and a gas one. The petroleum deals that were signed have gone off without a hitch, and are finally beginning to pay off. That can’t be said for all of the gas contracts. The Akkas field in Anbar, which was put up for bidding in October 2010, drew local protests that may lead to the deal being scrapped. Since 2008, Baghdad has been talking to Shell and Mitsubishi over a proposal to extract natural gas from the oil fields in Basra, but the two sides have run into one delay after another. That’s not a good record when it comes to natural gas, and Anbar is going to be included in the new round this year as well. Their demands have still not been met over the Akkas field, so there’s a good chance that they will protest again if another block gets a winning bid and they are not included in the talks.

Iraq sits atop a sea of oil and gas that has been neglected for twenty years due to wars and international sanctions. Some of the largest petroleum fields in southern Iraq have attracted international energy companies, but there are still plenty of others that have barely been touched. Natural gas is in an even sorrier state. Most of the gas produced is burned off and wasted, and there is a lack of infrastructure such as pipelines and storage facilities. Iraq desperately needs to attract foreign investment and know how to develop these two important fields. At the same time, the government has to be able to finalize any deals that it signs, and avoid more Shell and Akkas situations. The fourth planned auction therefore, holds many promises and possible problems for the country’s energy industries.

SOURCES

El Gamal, Rania, “ANALYSIS-Iraq seeks a plan B if Shell gas deal falters,” Reuters, 3/2/11

Hafidh, Hassan, “Iraq To Auction 12 Exploration Blocks In November – Oil Minister,” 3/22/11

Miller, T. Christian, “U.S. Missteps Leave Iraqis in the Dark,” Los Angeles Times, 12/25/05

Al-Tamemi, Noor, “Iraqi oil ministry prepares for fourth licensing round,” AK News, 3/20/11

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