Iraq’s offering in the fourth bid round announced this week is a mixed bag of blocks open for exploration. Spread over several provinces but mostly focused in the west, the area the least explored over the past decades, they offer potential to explore for gas as well as oil. About eight of the 12 blocks offered are situated along the western border from the northwestern Iraq-Syria border down to the southern Iraq-Saudi border. In the western desert, and based on a certain pressure and temperature, the likeliness of a gas window, and consequently of sizeable non-associated gas finds, is big. That’s what Iraq is after: creating a gas-based western industrialized region in provinces now considered less than privileged when it comes to hydrocarbon resources.
The geographic distribution, with blocks spread over the 10 provinces of Nineveh, Anbar, Najaf, Qadissiya, Babel, Muthana, Diyala, Wasit, Thi Qar and Basrah – albeit not in an equal manner – aims essentially at placating any outcry from some of the provincial councils of being left out. That might also be the reason for throwing in a few blocks believed to have oil deposits.
Mixing exploration for gas with exploring for oil will make it challenging for the Iraqi oil ministry to come up with the right contractual terms to offer IOCs. First of all, the terms that could apply to oil bocks are not the same for gas. Secondly, while insisting that any oil discoveries will not be developed right away but they aim at replenishing the reserves as output is set to double and later triple over the next few years, it is not yet clear what kind of upside the oil ministry will offer international oil companies to carry out seismic and drill exploration wells if they are not to develop their finds.
The oil ministry has given itself eight months to conclude this round, aiming to award the exploration service contracts by January 2012, according to the announcement made by Oil Minister Abdul Karim al-Luaybi April 25. This timeline, which envisages a road show to present the technical details of the blocks in August, and a workshop in November to discuss the model contract to be applied to those blocks, might turn out to be too ambitious at a time when ministry officials admit that the main thinking behind this round has not matured yet.