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Iraq offers up three gas fields to global firms

Less interest expected than for oilfields.

October 20, 2010 10:40 by

Iraq on Wednesday offered up three of its gas fields in its third energy auction since the 2003 U.S.-led invasion, hoping to leap into the ranks of top energy producers and shake off a legacy of war and isolation.

But the gas auction, which began shortly after 10 a.m. local time (0700 GMT), has generated little interest from energy firms despite their eagerness to tap the country’s vast reserves, analysts said. Interested bidders face tough terms, shaky security and provincial opposition to the bidding round.

Iraq was tendering gas fields at Akkas in the western desert, Iraq’s Sunni heartland and once an al Qaeda stronghold, Mansuriyah near the Iranian border in volatile Diyala province, and Siba in the relatively peaceful southern oil hub of Basra.

In total, the three fields have estimated reserves of 11.23 trillion cubic feet of gas, about 10 percent of Iraq’s total 112 trillion cubic feet of proven natural gas reserves, the world’s 10th largest.

The bidding round had already been delayed twice to give companies more time to study contract terms.

Thirteen companies registered for the auction including Italy’s ENI , Edison , France’s Total ,Norway’s Statoil , South Korea’s KOGAS , and Russia’s TNK-BP .

But not all registered firms were expected to actually bid on Wednesday, industry observers said.

Winning bidders will have to build almost non-existing gas infrastructure and a pipeline network from scratch and brave the risks of operating in violent areas where some provincial opposition against the auction is already ramping up.

Despite the challenges ahead, the auction could still be a first step into one of the few untapped gas reserves on the planet and not all firms can afford to miss out.

Baghdad had said the priority for the gas on offer was for domestic consumption, but some firms bidding for the auction also eye exports to neighbouring countries.

Iraq, starved of electricity after years of war, sanctions, neglect and sabotage, hopes opening its gas sector to foreign investment will boost its power generating capacity.

The country’s national grid only supplies a few hours of electricity each day.

The OPEC member is in desperate need for billions to rebuild its battered economy and crumbling infrastructure.

It signed a series of development contracts with global oil companies after two bidding rounds last year in a bid to boost its crude production potential to Saudi Arabia’s levels of 12 million barrels per day (bpd) from around 2.5 million bpd now.

Such deals, and possibly the gas contracts Iraq is expected to award on Wednesday, have cemented the country’s position as an emerging oil and gas power. (Writing by Rania El Gamal; Editing by Michael Christie and Jon Hemming)

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