Iraqi Oil Contracts To Be Auctioned In Live TV "Game Show"

Iraqi oil contracts to be auctioned in live TV 'game show'
More than 30 energy companies, including BP, Shell and ExxonMobil will be forced to tussle for contracts worth billions.

http://www.telegraph.co.uk/finance/n...game-show.html

By Rowena Mason
Published: 8:10PM BST 26 Jun 2009

Oil giants will be forced to tussle for contracts worth an estimated $16bn (£9.7bn) live on Iraqi television in a bizarre contest they fear could end up resembling a game show.

More than 30 energy companies, including BP, Shell and ExxonMobil may be forced to make last-minute alliances and reveal their offers in a tense round of bidding due to start early next week.

Iraq, which has the world's third-largest proven oil reserves, plans to conduct the bidding for contracts to develop six major oil and two gas fields publicly over the course of a few hours.

The scheme appeared to come as a shock to some of the major oil companies. Others admitted they "had an inkling" that Baghdad would conduct the process in the open but had not expected a televised spectacle.

"It's like a Eurovision song contest or a game show for energy companies," said an executive at a top-three global oil giant. "A lot of work has gone into preparing our bid but I think on the day we are going to see the process may be quite fluid. If some companies find themselves disappointed on one contract they may have to make deals with other partners on the spot."

It is likely that each energy company will submit a sealed bid, which will then be compared with other offers, before the government awards the contract there and then.

"BP certainly does not have any objection to efforts to make the process public and transparent," a spokesman for the oil giant said last night.

There will later be a second bidding round for 11 oil and gas fields, as the government attempts to boost production from 2.4m to 6m barrels a day by 2015.

Analysts estimate that the contracts could yield $1 trillion for Iraq over the next 20 years.

The world's biggest oil companies, also including Chevron, Total, Sinopec and ConocoPhillips, are expected to take part by making an offer for up to three contracts as members of a consortium.

However, there are a number of much smaller companies which are hoping to add specific areas of expertise by partnering with larger oil and gas groups. It is understood that Shell has been in talks about a tie-up with two Chinese energy groups.

However, it is possible that Baghdad may not look kindly on a bid from the Chinese state company, Sinopec, which took over London-listed Addax in Iraq's Kurdistan region last week. The Iraqi oil minister, Hussain al-Shahristani, has not given his support to companies drilling in the semi-autonomous region, warning that it could hamper their success in the official contract process. But Kurdistan has been much quicker than the central government to develop its crude production with foreign partners.