Daily Archives: June 30, 2009

Carola Hoyos

BP and CNPC have won the right to help Iraq develop the Rumaila field. The UK and Chinese companies beat ExxonMobil, the US oil company, which had partnered with Petronas, the Malaysian oil company. BP clinched the contract when it agreed to reduce its fee per barrel from $3.99 to $2.

But the rest of the auction has not gone as smoothly. In fact, so far, the smaller five of the eight oil and gas fields being auctioned off have failed to find a company willing to accept the narrow terms and the relatively low price Iraq is willing to pay for their services. And the future of West Qurna, the biggest of the fields, is looking in doubt after ExxonMobil and CNPC both rejected Iraq’s tougher terms. Royal Dutch Shell has bid for Kirkuk, but no winner has been announced for that field.

Today had marked the beginning of a long-awaited journey. Braving sand storms and the continued violence on Iraq’s streets, oil executives had come to Baghdad to make their bids. It was the first time since nationalisation more than 30 years ago that international oil companies would be allowed back into the country.

After much debate, Iraq had decided to allow foreign oil companies to help repair its oil developments, which have been plagued by years of war, sanctions and violence. The companies will be paid a fee for their service, but they hope their willingness to accept such narrow terms eventually could lead to more lucrative exploration and development deals.

Kicking off the bidding ceremony, Nuri Al-Maliki, the country’s prime minister, promised Iraq would make even more fields available to international companies that want to develop them.

Bid envelopes for the fields were opened every 45 minutes to an hour. They contained two numbers – the per barrel fee the company proposes to charge Iraq for helping repair the field and the point at which it believes the field will plateau.

The plateau is not only an engineering ambition, but also decides at what point companies begin to make money. Thus the lower the first number and the higher the second, the more likely the bid would win the contract.

Here is the line-up for other contracts auctioned so far:

The Mansuriyah gas field got no bids.

There were four bids from different consortia for the Zubair oilfield. But in the end the winning bidder rejected the terms on which Iraq was insisting and the field went unawarded. The groups that had initially bid were BP , together with CNPC; India’s ONGC with Gazprom Russia and Turkish Petroleum Corp. The third was headed by Italy’s ENI, with China’s Sinopec, Occidental and Korean Gas; and the fourth was led by Exxon Mobil, with Royal Dutch Shell and Petronas.

The Maysan field failed to find a developer as Iraq and the single consortium that bid (Cnooc and Sinochem) could not agree the terms.

The Kirkuk field got one bid by a group led by Royal Dutch Shell and including Sinopec and the Turkish Petroleum Corp.

The Bai Hassan failed to find a developer as Iraq and the ConocoPhillips-led consortium that bid on it failed to agree terms.

The West Qurna field got five bids, but its future hangs in the balance after ExxonMobil and CNPC both rejected Iraq’s tougher terms.

The Akkas gas field got one bid from a group led by Edison.

The the group led by Cnooc, the Chinese oil company, that bid on the Missan oil field, ended up rejecting Iraq’s tougher terms.

Ed Crooks

On Energy source today:

LIVE: the first bids for Iraq’s oil contracts come in

Oil rises with economic recovery hopes

Elsewhere:

At least 15 people dead in Italy LPG accident (Bloomberg)

BG Group invests $1bn in US shale gas (OilVoice)

How to convince conservatives to support public transportation (Infrastructurist)

The Washington Post discovers the problem with energy subsidies, with fun historical headlines (Institute for Energy Research)

Waxman-Markey defended (Belfer Centre at Harvard)

A look at the “synthetic tree” for catching CO2 on the cheap (New Energy and Fuel)

The controversy over the effect of the US Natural Gas Fund on US gas prices (Platts)

US public under-estimates the future need for oil and gas, according to the American Petroleum Institute (PennEnergy)

Oil hit an eight month high on Tuesday and was on track to post its largest quarterly gain since 1990 as optimism for an economic recovery rather than clear news flow continued to drive crude prices.

The energy market defied predications of a quiet US holiday trading period as US crude again broke through the $72 a barrel level, adding to a 3.7 per cent rise in the previous session.

“Crude posted a strong advance yesterday proving that among all those warnings of a cautious approach, optimism about the economic outlook is still making headlines,” said Marius Paun of ODL. “The employment report on Thursday is likely to be the main influencing factor for the energy complex offering guidance on the short term.”

A softer dollar added to crude’s upward momentum, with a weaker greenback boosting the appeal of dollar-denominated commodities such as oil and gold.

Nymex West Texas Intermediate futures for August delivery, the US benchmark, rose 56 cents to $72.03, while ICE August Brent gained 66 cents to $71.65.

Earlier WTI hit $73.38 a barrel, the highest level since late October last year.

Spot gold rose 0.4 per cent to $940.50 a troy ounce, the sheen of the yellow metal enhanced by the dollar’s falls, while base metals were broadly stronger.

“Gold has stabilised against the euro over the past few sessions, recovering from a plunge at the start of last week, but sill in an overall lower trend from recent highs at the start of June,” said analysts at UBS.

Copper rose 0.8 per cent to $5143 per tonne, with aluminium up 0.7 per cent to $1651a tonne.

- Oil watchdog cuts demand forecasts
IEA also says threat of supply crunch has receded (FT)

- EU optimistic on defusing Ukraine gas dispute
But stresses aid dependent on reform of gas sector (FT)

- Green groups to sue over RBS investments
Action could be landmark lawsuit against UK Treasury (FT)

- China unexpectedly raises fuel prices
Raises gas and diesel prices to highest level ever (Reuters)

- Enterprise Partners to buy Teppco for $3.3bn
New company will control 48,000 miles of pipeline (FT)

- French government forces Areva’s ‘iron lady’ to bend
Board meets to rubber stamp the inevitable (FT)

- Canada’s Ontario province suspends nuclear reactor plan
Reactor would have been North America’s first in 30 years (FT)

- Oklahoma attorney-general charges BP with price manipulation
Alleges company artificially inflated US gasoline prices (Reuters)

- US high court nixes Chevron bid for Petroecuador arbitration
Chevron saddled with cost of Amazon environmental clean-up (Platts)

- Lex: Shell in Russia

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