Iraq Makes Changes to Bid Round Terms

Iraq has made favourable changes to some of the terms of contracts offered to international companies to explore for oil and gas in 12 blocks in the country's fourth licensing auction scheduled for end of May, Dow Jones said in a report Monday.

The report said the most important change the Iraqi oil ministry has made to the original model contract is that international firms would have 100% stake in the projects, with state-owned Iraqi companies holding none. That was up from the 75% stake initially proposed.

The new changes were made after feedback from oil and gas companies concerned that they would be taking on risky contracts for minimal rewards, the report said.

The ministry has also changed a provision that allowed the Iraq ministry to postpone development of fields, to a period of up to seven years from the date of the announcement of commercial discovery, which was mentioned in the previous model contract and was one the terms disliked by potential bidders.

In case of oil discovery and the Iraqi government decides to put on hold development of the field, contractors are liable to reimburse costs of appraisal and exploration plus interest at Libor +3% during the years that the development is on hold.

In the previous draft contract, contractors were not liable for such interests.

For special costs which include de-mining, building roads, etc, contractors are liable to receive interest at Libor +5% during the years that development of fields is on hold.

The move comes as some oil majors, including France's Total and ExxonMobil Corp. of the U.S., have shown more interest in exploration in the country's northern semi-autonomous Kurdistan region than from the middle and south, which are controlled by the central government.

Nine companies have dropped out of the fourth bidding round but Iraq expected a good number of bids from the 37 firms still in the race.