ERBIL (Kurdistan 24) – Baghdad postponed its oil and gas bidding round for 11 new blocks for 10 days, until April 25, an Iraqi oil official said on Thursday.
The Iraqi Federal Government had planned to award oil and gas exploration and development contracts for the new blocks on April 15. The blocks are located on the Iran and Kuwait borders as well as Gulf waters, offshore.
“The bidding process was rescheduled to be on April 25. It is just to give the companies a little bit more time to submit the bid bonds and be prepared for the bidding,” Abdul Mahdi al-Ameedi, head of the Iraqi Oil Ministry’s licensing and contracts office, told Reuters.
Oil by-products from the companies’ revenues will be excluded from the new contracts, according to the Iraqi official. A linkage will be established between prevailing oil prices and payment, introducing a royalty element.
Foreign oil companies currently operating in Iraq receive remuneration from the government which is linked to production increases. It includes crude oil and oil by-products such as liquefied petroleum gas and dry gas.
Iraq, the second-largest oil producer in OPEC after Saudi Arabia, decided to change the contract frameworks with foreign oil companies following a glut caused oil prices to crash in 2014, affecting the ability of the Iraqi government to afford such payments.
Over the past decade, many oil companies such as Exxon Mobil, BP, Total, Eni, Lukoil, and Royal Dutch Shell, assisted Iraq in boosting its output by 2.5 million barrels per day (bpd) to almost 4.7 million bpd.
Unlike the Federal Government of Iraq, the Kurdistan Regional Government (KRG) produces oil and gas from the fields under its control in a production-shared model, which tends to be more profitable to oil companies.
Baghdad, in its new contracts, will also push companies to put an end to gas flaring from oilfields in the coming years.
Gas extracts from the fields along with crude oil continue to be flared in Iraq as the country does not have the facilities to process it into fuel for local consumption or export.
The central Iraqi government aims to stop gas flaring by the end of 2021, which amounts to almost $2.5 billion in lost revenue for Baghdad, a sum that could fulfill most of the needs for the gas-based power generation, according to the World Bank.
Editing by Nadia Riva