Iraq’s move to rush oil bidding could deter some major companies

The Iraqi Cabinet approved a five-year development plan with a target of 6.5 million barrels a day by 2022 earlier this month. Above, a worker operates valves in Nihran Bin Omar field north of Basra. (AP)
Updated 25 April 2018
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Iraq’s move to rush oil bidding could deter some major companies

  • Last month, Oil Minister Jabar Ali Al-Luaibi unexpectedly moved the date to receive bids from late June to April
  • Fourteen companies are qualified to bid for exploration and development rights for 11 underdeveloped blocks

BAGHDAD: Iraq is opening more of its untapped oil and gas resources to foreign developers, hoping to boost revenues after its costly war with the Daesh group, but analysts say the rushed bidding process — now timed to precede national elections — could draw a lukewarm response.
Last month, Oil Minister Jabar Ali Al-Luaibi unexpectedly moved the date to receive bids from late June to April, meaning the bidding would be held before May 12 national elections. Some believe Al-Luaibi, who is campaigning for a seat in parliament, moved up the date for political reasons.
Al-Luaibi hopes to represent the oil-rich southern province of Basra as a member of the Victory Alliance, which is led by Prime Minister Haider Al-Abadi, who is running for re-election.
“Personal and partisan interests are taking priority over national interests,” said Ruba Husari, managing director of the consulting firm Iraq Insight. “The objective of the exercise is aimed doubtlessly at portraying the ministry — and the minister — as aggressive in developing the nation’s resources ahead of the (elections).”
The Associated Press placed multiple calls to Al-Luaibi’s spokesman, who did not pick up. An aide to the spokesman said Al-Luaibi’s office was too busy with the election campaign to comment on the allegations.
In one of his campaign videos, Al-Luaibi tries to reassure a group of weary Iraqis who are worried about their future.
“Past years have wreaked havoc on everything,” a man in traditional Arab clothing says in the video, referring to the devastation caused by war. “Iraq’s wealth is your responsibility,” says a woman dressed in a conservative abaya — a loose black cloak that covers the body from shoulders to feet.
“I’m confident that with your determination I can protect the wealth of the generations,” Al-Luaibi says at the end of the video.
Thursday’s auction will be the fifth since Iraq opened its vast oil and gas reserves to international energy companies in 2009 for the first time in decades.
In previous bidding rounds, officials spent months hosting conferences, road shows and discussions with companies before issuing final contracts. Last month, the minister changed the date to April 15, but when companies asked for more time it was extended to Wednesday, and then to TSwitch to plain text editorhursday.
Ian Thom, principal analyst at energy consultancy Wood Mackenzie, said the tighter deadline could work against Iraq.
“Companies may be more cautious if they have not fully evaluated the bid terms,” he said. “This may result in bids being less competitive as companies seek a greater margin of safety.”
Fourteen companies are qualified to bid for exploration and development rights for 11 underdeveloped blocks.
Seven are located near the border with Iran, and three others are located near the Kuwaiti border, while the 11th is in the Arabian Gulf, in Iraqi territorial waters.
Encouraged by an improved security situation, Iraq in 2009 began to attract international oil companies to develop its vast untapped oil and gas reserves. Top among major oil companies are the US’s Exxon Mobil, Royal Dutch Shell, the UK’s BP, China’s CNPC and Russia’s Lukoil.
Since then, Iraq has awarded a handful of oil deals to develop major fields that hold more than half of its 153.1 billion barrels of proven oil reserves. Deals to tap natural gas resources were also awarded. As a result, Iraq’s daily production and exports have jumped to levels not seen since the late 1970s and early 1980s.
The country is now producing around 4.36 million barrels a day from Baghdad-controlled oil fields, up from nearly 2.4 million a day in 2009, and its daily exports averaged 3.450 million barrels a day last month, making it OPEC’s second-largest producer behind Saudi Arabia. Oil revenues make up nearly 95 percent of the country’s budget.
An economic crisis set in over the course of 2014, when the Daesh group swept across much of northern and western Iraq and oil prices plummeted. Iraqi forces concluded major military operations against the extremists last year, but large parts of the country were reduced to rubble.
In February, Iraq secured $30 billion from international donors to help rebuild devastated areas, far from the $88.2 billion Baghdad estimates it needs.
Earlier this month, the Iraqi Cabinet approved a five-year development plan with a target of 6.5 million barrels a day by 2022.
Iraq’s 2018 budget of nearly $88 billion comes with a deficit of more than $10 billion. It is based on a projected oil price of $46 per barrel and a daily export capacity of 3.8 million barrels.


Germany sees ‘most difficult part’ in EU-US trade talks ahead

Updated 50 min 40 sec ago
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Germany sees ‘most difficult part’ in EU-US trade talks ahead

  • ‘For some weeks and months now, we’re observing with concern that the US is tightening its trade policies, that tensions are increasing’
  • ‘The impact can already be seen in the world economy, global growth has slowed’

BERLIN: The most difficult part in trade negotiations between Europe and the United States is starting now and talks should focus on reducing tariffs on industrial goods to increase the chances of a deal, German Economy Minister Peter Altmaier said on Tuesday.
A confidential US Commerce Department report sent to President Donald Trump over the weekend is widely expected to clear the way for him to threaten tariffs of up to 25 percent on imported autos and auto parts by designating the imports a national security threat.
“For some weeks and months now, we’re observing with concern that the US is tightening its trade policies, that tensions are increasing,” Altmaier told Deutschlandfunk radio.
“The impact can already be seen in the world economy, global growth has slowed,” Altmaier said.
Asked about the risk of higher US car tariffs, Altmaier said he did not buy the argument that imported cars would threaten the national security of the United States.
Altmaier, a confidant of Chancellor Angela Merkel, said that reducing tariffs on cars and other manufactured goods should be the main focus of the ongoing trade talks.
“We are not yet where we want to be. We might have made one-third of the way and the most difficult part will be now,” Altmaier said.
Altmaier added that he was in favor of reducing import tariffs for cars to the same level in the US and Europe, “ideally to zero percent.”
The trade talks will also be high on the agenda during a meeting of Altmaier with his French counterpart Bruno Le Maire in Berlin later on Tuesday.
Both ministers are expected to narrow differences on how far the negotiation mandate of the European Commission in the talks with the US should go and which areas should be excluded.
France is reluctant to open up its agriculture sector to US imports and Altmaier said he was fine with excluding the issue in the trade talks.
“Agriculture is a very sensitive topic, so we don’t want to talk about this in the current situation,” Altmaier said.
Altmaier and Le Maire are expected to hold a news conference after the talks.
European Commission President Jean-Claude Juncker told a German newspaper that Trump had promised him he would not impose additional import tariffs on European cars for the time being.
If Trump imposed tariffs on European cars, however, the EU would react immediately and not feel obliged to stick to its promise to buy more soybeans and liquefied gas from the United States, Juncker added.