28 October 2008
The Iraqi oil ministry is gearing up to send out the initial tender protocol and data packages for the eight oil and gas fields included in its landmark first bid round by the end of this week, and expects international oil companies to pay participation fees for the fields on which they choose to bid by Dec. 31, ministry sources say.
Despite the accelerated process, questions persist over the ministry’s ability to award 20-year service contracts involving billions of dollars in investment without endorsement by parliament. Oil Minister Hussein al-Shahristani has said contracts will be ratified by the cabinet, but oil firms may require the added guarantees provided by the legislature when the contracts are voted into law.
Adding to the challenges facing companies competing for the first contracts to be tendered in Iraq since nationalization, officials say the current security situation in the country does not constitute force majeure.
The initial tender protocol describes the basic rules for the offering, which includes a list of the 35 prequalified companies, the technical qualifications for operatorship, data packages, participation fees for the different fields, and bidding rules and restrictions as outlined to companies at a London road show earlier this month. The data packages comprise a technical overview by contract area, including seismic data, geological maps, production data, workover and well status, final well reports and logs, and facilities information.
Ministry officials have warned the companies that the data include numerous gaps and omissions and are of variable quality. Model contracts and petroleum regulations are included in the packages.
Operatorship qualifications are determined by companies’ output. Energy Intelligence data identify 18 prequalified companies producing more than 500,000 barrels of oil equivalent per day that can bid for any oil field, including Rumaila and Kirkuk. Eight companies producing 250,000-500,000 boe/d can bid to operate Zubair, West Qurna Phase 1, Missan and Bai Hassan. Nine firms with less than 250,000 boe/d of output cannot operate fields and can only join consortia.
The ministry intends to publish a separate list of companies qualified to operate gas fields. This is likely to include gas-focused companies as well as integrated firms.
The model contract defines the international oil companies as cooperators and Iraqi regional firms as operators.
Payment of a participation fee entitles a company to receive the information packages and to bid for fields, subject to qualification. The oil ministry has already announced a $250,000 fee for the two nonproducing gas fields of Akkas and Mansouriah, $350,000 for the Missan fields and $500,000 for each of the remaining five oil fields. A $2.5 million flat fee has been fixed for all eight fields.
The ministry said it encourages companies to form consortia and that they are free to establish these up to the point of bidding. The only requirements, as outlined in the bidding rules, are that each consortium should have a qualified operator holding a minimum of 30% of the consortium for the field in question and that each partner should have at least 5% of the consortium. A company cannot bid as part of different consortia for the same field, but is free to join up with different consortia for other fields. A consortium may not bid for more than three fields and no company may operate more than one field.
The delivery of the initial tender protocol and data packages by Oct. 31 is the first in a series of timelines fixed by the ministry. Next is a workshop to be held by the first quarter of 2009 for companies that pay participation fees by end-December. Firms can send comments on contracts until the end of March, after which the ministry will publish the final tender protocol in the second quarter. This will constitute the definitive process document for the licensing round and will include additional details on the bidding process and evaluation parameters, the bidding timetable, the form of bid guarantees, and baseline production levels for each field. Ministry officials said the final tender protocol should be issued at least 30 days ahead of bidding.
Bidding itself will be a “transparent and public process,” the ministry insists, with the fields offered sequentially. Results from one bid will be known before the next bid is due. A bid bond will be required for each offer, replaced on signature with a performance guarantee.
Ministry officials have already outlined the three bidding parameters: a maintenance remuneration fee, an incremental remuneration fee, and an enhanced production target above a predefined production baseline. The weighting of each will be announced in the final tender protocol.
If and when the contracts become effective, the ministry’s timetable for boosting output by 1.5 million barrels per day from the six oil fields, now producing a combined 2 million b/d, is no less ambitious.
The model contract defines a minimum work obligation, covered in an annex, which includes all well work such as recompletions, workovers and drilling; all surface work, including debottlenecking and enhancements; and reservoir characterization and dynamic modeling, including 3-D seismic acquisition.
The minimum work is to be completed within three years of the effective date of the contract. Within six months, companies will be asked to submit a rehabilitation plan for the oil fields. Once approved, this should be followed within 60 days by submission of the work program and budget. Field operations should start within six months of approval of the rehabilitation plan. The enhanced redevelopment plan that follows rehabilitation is due no later than three years from the effective date.
The ministry has made the funding of training a requirement. It has fixed this at $1 million per year for the giant oil fields of Kirkuk, Rumaila, West Qurna and Zubair, and $500,000 annually for the other fields.
By Ruba Husari, Dubai
Non-restricted Operators
|
Company |
Output (‘000 boe/d) |
| Gazprom | 9,874 |
| Exxon Mobil | 4,237 |
| BP | 3,878 |
| CNPC | 3,479 |
| Shell | 3,425 |
| Chevron | 2,585 |
| ConocoPhillips | 2,567 |
| Total | 2,285 |
| Lukoil | 1,747 |
| Eni | 1,740 |
| Petronas | 1,678 |
| StatoilHydro | 1,674 |
| ONGC | 1,109 |
| Repsol YPF | 1,090 |
| Sinopec | 898 |
| Occidental | 602 |
| BG | 601 |
| Anadarko | 530 |
Restricted Operators
|
Company |
Output (‘000 boe/d) |
| CNOOC | 455 |
| Inpex | 418 |
| Marathon | 376 |
| Hess | 359 |
| BHP Billiton | 318 |
| Maersk Oil | 318 |
| Wintershall | 305 |
| Pertamina | 264 |
Non-operators
|
Company |
Output (‘000 boe/d) |
| Nexen | 156 |
| Nippon | 124 |
| Woodside | 123 |
| Mitsubishi | 90 |
| TPAO | 79 |
| Japex | 41 |
| Kogas | NA |
| Sinochem | NA |
| Edison | 15 |
(Published in International Oil Daily October 28, 2008)