State-owned Oil and Natural Gas Corp's losing streak in Iraq continued today when it lost the bid to develop Iraq's giant Halfaya oilfield to a consortium led by a Chinese firm.
ONGC Videsh, its overseas investment arm, teamed up with state-run Oil India Ltd and Turkish Petroleum Corp (TPAO) to bid for the third largest field on offer in Iraq's second post-war bid round today, company sources said.
A group led by China National Petroleum Corp bid lower than the $1.76 per barrel fee OVL and partners sought for boosting output from Halfaya field to 550,000 barrels per day.
CNPC, Petroliam Nasional Bhd (Petronas) and Total SA offered to boost production to 535,000 bpd from current 3,000 bpd at a cost of $1.40 a barrel. The Halfaya oilfield has estimated reserves of 4.1 billion barrels of oil, they said.
The Chinese held 50 per cent stake in the group, while Total of France and Malaysia's Petronas hold 25 percent each.
OVL had, in the first round in June, lost the Zubair oilfield when it along with OAO Gazprom of Russia and TPAO had asked for a remuneration that was about five times higher than $1.90-2 a barrel that Baghdad was willing to pay.
TPAO had a 50 per cent in the group that bid today while OVL held 30 per cent. OIL had the remaining 20 per cent.
Petronas teamed up with Royal Dutch Shell to also win Iraq's super-giant Majnoon oilfield.
Sources said Statoil ASA, Norway's biggest oil and natural gas producer, and Russia's OAO Lukoil also made a bid that was better than OVL-led group by offering to produce 600,000 bpd from the Halfaya oil field at an average $1.53 a barrel.
Also in the fray was a joint venture of Eni of Italy, Sononal of Angola, Cnooc of China, Korea Gas and Occidental of the US, which wanted to be paid $12.9 per barrel for producing 400,000 bpd of peak output from Halfaya oilfield.
Iraq sought bids from 45 pre-qualified oil firms on the dollar-per-barrel remuneration fee they want for developing the fields and the targeted plateau production.
Shell-Petronas proposed a per-barrel fee of $1.39 for Majnoon and a plateau production target of 1.8 million bpd compared to the current level of 46,000 bpd. They bear a rival bid by Total SA and CNPC for the field which has an estimated reserves of 12.6 billion barrels of oil.
While the first post-war Iraqi licensing round in June was focused on increasing output from huge oilfields already in production, the second is about bringing on stream massive undeveloped fields such as Majnoon and West Qurna Phase 2.
Sources said the scoring formula for the two bidding parameters -- the dollar-per-barrel remuneration fee and plateau production target -- has been weighted 80 per cent toward the fee, with the aim of dissuading companies from promising unrealistically high output targets.
Exxon Mobil Corp, Shell, Total and Russia's OAO Lukoil are vying for the right to develop 10 fields holding 41 billion barrels of oil reserves, a third of the country’s total deposits, on offer in the round taking place in Baghdad today and tomorrow.
Iraq, holder of the world's third-largest oil reserve, is seeking foreign investors to boost output after six years of conflict, and prior sanctions destroyed its infrastructure.
Iraq wants to boost oil output to 7 million barrels a day in the next six years, its Oil Minister Hussain al-Shahristani said in a speech at the round today.
The 10 projects available in the second round are Majnoon, West Qurna-2, Najmah, Qaiyarah, East Baghdad, the Eastern Fields, Badra, Middle Furat, Halfaya and Garraf, with five sites offered on each of the two days.
Bidders must accept service contracts that pay them a flat fee for each barrel extracted, rather than production- sharing agreements in which they gain a stake in the crude produced. A service contract means that they do not benefit from a rise in oil prices.
In the first licensing round, BP Plc and CNPC won the contract for the southern Rumaila field, the biggest offered.
None of the other seven projects was awarded in June as the ministry failed to agree with companies on the amount they would be paid for extracting oil and gas. Subsequently, contracts were agreed with Irving, Texas-based Exxon and Eni, based in Rome.