The numbers: gas field bidding round results
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Akkas stalls again
Demands from Anbar officials, including assurances that gas from the Akkas field be utilized in the deprived province, have not been resolved since the dispute surfaced in October, delaying a signing ceremony at the Oil Ministry headquarters attended by nearly a dozen representatives of the Korean Gas Corp. (Kogas) and Kazakhstan’s KazMunaiGaz.
“We can’t go forward in these deals unless we have approval of the local governments,” said Oil Minister Abdul Karim Luaibi, speaking to reporte…
Executives from the Korean Gas Corp. and Kazakhstan's KazMunaiGaz wait at the Feb. 24 Akkas gas field signature ceremony, which was cancelled after Anbar province demands were not met. (BEN VAN HEUVELEN/Iraq Oil Report)
By Ben Van Heuvelen and Ben Lando of Iraq Oil Report
Published February 25, 2011
Demands from Anbar officials, including assurances that gas from the Akkas field be utilized in the deprived province, have not been resolved since the dispute surfaced in October, delaying a signing ceremony at the Oil Ministry headquarters attended by nearly a dozen representatives of the Korean Gas Corp. (Kogas) and Kazakhstan’s KazMunaiGaz.
“We can’t go forward in these deals unless we have approval of the local governments,” said Oil Minister Abdul Karim Luaibi, speaking to reporte…
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All three of Iraq’s gas fields up for auction were awarded Wednesday to four international oil companies.
A representative of Kuwait Energy casts its winning bid for the Siba gas field as oil ministry leaders look on. (BEN LANDO/Iraq Oil Report)
By Ben Lando of Iraq Oil Report
Published October 20, 2010
BAGHDAD - Four companies created three different consortium to win rights to develop the Akkas, Siba and Mansuriya gas fields.
The ministry judged the bids with a two-prong bidding parameter: 90 percent of the score was given to the remuneration fee (RF), the amount per barrel of oil equivalent produced (boep) that the foreign companies are willing to accept/the ministry of oil is willing to pay. Ten percent of the score is the production plateau target (ppt), the production goal at which the winning bid will bring production to and keep it for a set amount of time.
Here are the results:
Akkas
In Anbar province, near the Syrian border, it is the biggest of the three fields with 5.6 trillion cubic feet of Iraq’s 112 trillion cubic feet of proven gas reserves.
Oil Ministry’s requirements:
* Minimum PPT: 375 million standard cubic feet per day (mmscfd)
* PPT period: 13 years
* Minimum expenditure obligation: $25 million
Winning bid:
The Korean Gas Corp. (Kogas) and Kazakhstan’s KazMunaiGaz (50/50 share, Kogas is the operator)
* RF: $5.50 per boep
* PPT: 400 mmscfd
Other bids:
France’s Total and the Turkish Petroleum Corp. (TPAO) (50/50 share, Total as operator)
* RF: $19 per boep
* PPT: 375 mmscfd
Siba
Siba holds 1.13 trillion cubic feet, and is located near the Kuwaiti border.
Oil Ministry’s requirements:
* Minimum PPT: 60 mmscfd
* PPT period: 9 years
* Minimum expenditure obligation: $25 million
Winning bid:
Kuwait Energy (60 percent) and TPAO (40 percent), Kuwait Energy as the operator
* Remuneration fee: $7.50 per boep
* PPT: 100 mmscfd
Other bids:
KazMunaiGaz
* RF: $16 per boep
* PPT: 65 mmscfd
Mansuriya
Another 4.5 trillion cubic feet of Iraq’s natural gas is in this Diyala province field.
Oil Ministry’s requirements:
* Minimum PPT: 225 mmscfd
* PPT period: 13 years
* Miniumum expenditure obligation: $25 million
Winning bid:
TPAO (50 percent), Kuwait Energy (30 percent), Kogas (20 percent)
* RF: $7 per boep (the consortium originally offered $10 per boep, but the ministry refused to go above $7)
* PPT: 320 mmscfd
Other bids:
None
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Three gas fields were offered; three were awarded. The Oil Ministry has taken a big step towards awakening the country’s dormant natural gas sector, despite opposition from some local leaders.
An official from KazMunaiGaz is congratulated after winning a 50 percent stake to develop the Akkas gas field. (BEN LANDO/Iraq Oil Report)
By Ben Lando of Iraq Oil Report
Published October 21, 2010
BAGHDAD - Iraq’s gas field auction was never guaranteed to be a success, mired as it was in local controversies, continuing political volatility, hesitation by foreign companies, and Oil Ministry delays. On Wednesday, however, the ministry netted a perfect score, awarding all three gas fields to foreign companies – on Iraq’s terms.
Although some provincial leaders objected to the development plans for fields in their territories, national government officials said the event was a triumphant step toward developing the dormant gas sector. Iraq badly needs gas for its power plants and industrial infrastructure, which are chronically short of fuel; eventually, the country is looking to export gas via pipelines to Europe.
“We need the gas,” said Thamir Ghadhban, the top energy advisor to Prime Minister Nouri al-Maliki. “We definitely need it for power generation and as a feedstock for industrial plants.”
Iraq holds the world’s 11th-largest proven gas reserves in the world, with 112 trillion cubic feet and a geological profile that suggests there’s much more to be discovered. Due to decades of war, sanctions, and underinvestment, however, Iraq has barely developed those resources.
Iraq’s limited gas production currently comes from the so-called “associated” gas that is generated as a byproduct of crude oil extraction – in Iraq’s case, over one billion cubic feet of gas per day (cf/d). Iraq lacks the infrastructure to process most of this gas, however, so 600 to 700 million cf/d is wastefully flared; only about 500 million cf/d is processed and delivered for consumption.
The fields auctioned on Wednesday are “dry gas” fields, meaning that only natural gas will be extracted from them. Under the terms of the winning bids, the three fields will produce a combined 785 million cf/d, more than doubling the volume of gas Iraq sends to market. Under the terms of the service contracts, the consortiums will develop and operate the fields and Iraq will compensate them in proportion to the amount of gas produced.
For the auction, the Oil Ministry invited 13 pre-qualified companies to submit bids composed of two numbers: a remuneration fee and a production plateau target. In the case of all three fields, the companies demanding the lowest remuneration fees were awarded the deals. The winning consortia were headed by Kogas, which won Akkas field; Kuwait Energy, which took Siba; and TPAO, which got Mansuriya.
Two of those fields were offered in Iraq’s first bidding round on June 30, 2009. Back then, Akkas, with 5.6 trillion cubic feet (tcf) of proven reserves, received only one offer, which demanded a much higher remuneration fee than the $8.50 per barrel of oil equivalent (boe) that the ministry was willing to pay. The Mansuriya field, with 4.5 million tcf, received no bids at the time.
That first auction, along with a second bid round in December 2009, resulted in contracts with 11 foreign consortia which are projected to revolutionize some of Iraq’s largest oil fields and catapult the country’s crude production from 2.5 to 12.5 million barrels per day (bpd) within seven years.
Those deals also promise to boost Iraq’s associated gas production to more than 5.6 billion cf/d, according to Oil Ministry estimates – that is, more than seven times the combined volume of the three dry gas fields just auctioned. In June, the Council of Ministers gave preliminary approval to a deal with Shell that would ultimately capture 2.5 billion cubic feet per day (cf/d) of associated gas from four of Iraq’s largest oil fields.
Some critics have asked why the ministry would develop these dry gas fields now, when its existing contracts are already slated to generate huge volumes of gas whose processing will require equally massive infrastructure investments.
Yet Ghadhban said that developing these gas fields fits squarely in the government’s energy master plan, which will be announced in the coming months.
“We have to develop those gas fields,” he said. “One of those gas fields was discovered in 1964 – Siba. The newest (of the three) was discovered in 1992. So they are overdue for development. It fits very well, to maximize our production capacity of gas.”
Competitive bidding
The gas auction took place in a dramatic ceremony similar to the first two oil bidding rounds. At the Oil Ministry’s auditorium in its headquarters in Baghdad, half of the room’s roughly 600 seats were filled for the occasion; on the stage sat Iraq’s oil minister and other top officials. One by one, executives walked to the stage and placed sealed envelopes containing their bids in a clear glass box.
Kim Myeong Nam, vice president and head of the Iraq Project Group for the Korean Gas Corp., kissed the ballot before he dropped it into the box, a bid for the Akkas field, to laughs from the stage and audience.
“I hope that will make a difference,” Shahristani said.
Kogas and partner KazMunaiGaz, from Kazakhstan, were up against France’s Total and partner Turkish Petroleum Corp.
The bids were unsealed, and Total/TPAO had offered to bring the field to 375 million standard cubic feet of gas per day, if the ministry would pay them $19 for each barrel of oil equivalent (boe). Kogas/KazMunaiGaz, however, offered a 400 million standard cubic feet per day production plateau at only a $5.50 per boe from the ministry.
“It seems your kiss made a difference,” Shahristani said as he announced the winner to a round of applause.
Other companies, however, criticized the Kogas offer as too low to actually turn a profit. Indeed, the consortium had even under-bid the ministry’s demand of $8.50 per boe, which it had revealed in the first bid round last year.
“We simply didn’t believe that it is economical,” said Besim Sisman, vice president of TPAO, which bid on all three fields, referring to the unfavorable terms that would have been required to win Akkas. The field is viewed as being technically difficult to develop, though an Oil Ministry official recently said there was a recent find of more reserves there.
An official from one of the eight companies that was pre-qualified but didn’t submit a bid said Kogas was able to severely under-bid its competitors because of its different motivations. As a state-owned oil company, Kogas was likely looking to secure supplies on behalf of its national government, whereas market-oriented companies are generally foolish to accept a deal that won’t turn a profit.
“It is going to be very hard to make money” on the $5.50 remuneration fee, the official said. “The break-even point is between $10 and $12.”
TPAO, along with junior partners Kogas and Kuwait Energy, did win the Mansuriya field in an uncontested bid to bring the field to 320 million standard cubic feet per day production. Its initial offer of $10 per boe was rejected, but the consortium agreed to the most the ministry would pay: $7.
A big concern for Mansuriya is the ongoing level of violence in Diyala province. A TPAO official said, however, that security is a known risk but not a deterrent to investing in Iraq.
TPAO will be the junior partner to Kuwait Energy in the development of the Siba gas field, in Basra province, which runs into Kuwait. Beating out a bid by KazMunaiGaz to produce 65 million standard cubic feet per day at a $16 per boe fee, Kuwait Energy and TPAO will run the field to 100 million standard cubic feet per day for only $7.50 per boe.
Local opposition
Opposition to developing the largest of the three fields, Akkas, has intensified in the days leading up to the bidding round.
The provincial governor has been a vocal critic since June, and the provincial council recently voted to oppose the Akkas development. The chairman of the Anbar provincial council, Jassem al-Halbousi, said all of the gas should be used to fund power plants and industry in the province before going elsewhere in Iraq.
In the lead-up to the auction, Halbousi called for demonstrations – none of which happened – throughout the province. “The people of Anbar should go on these demonstrations until their demands are met,” he said.
Oil Minister Hussain al-Shahristani, on the other hand, has been a strong advocate of federal authority over the oil and gas sector, and forcefully cast aside provincial objections, which he characterized as “propaganda” against the ministry’s plans.
“Gas is the sole ownership of the Iraqi people,” Shahristani said. Then he delivered a pointed message “to all the provinces,” saying, “No individual or party are authorized to claim they are entitled to this wealth. The government will be very strong and severely punish everyone who will hinder signing the contracts.”
The oil minister’s hard line against Anbar represents his attempt to keep other provinces from following the controversial example of the Kurdistan Regional Government (KRG), which has defied Baghdad and asserted control over its oil sector by signing contracts with dozens of foreign firms since 2005.
Anbar province has made some moves in that direction, courting foreign investors, including foreign oil companies, in a do-it-alone effort that has been as much an assertion of economic autonomy as a response to central government inaction.
Deputy Oil Minister Abdul Karim Luaibi took a more conciliatory approach when discussing Anbar. He attributed the provincial grumbling to “a misunderstanding” and said the gas from the new deals will be dedicated first and foremost to power generation, including to new plants in Baghdad and Anbar.
“I talked yesterday to the governor of Anbar and explained the master plan for gas,” he said, though he also added that “if there is any excess quantities, we must export it through Syria or Turkey – not just (from) Akkas, but all excess gas.”
Ziyad Mohammed, a provincial council member, said there are other issues to worry about – the province is still a hotbed of insurgency, and Kurdish-Arab disputes have prevented the council from reaching quorum for three months.
“We won’t reject (the Akkas deal) because it is a minor issue,” he said.
The other two gas field deals have drawn less controversy, though Farid Khalid, the head of the energy committee of Basra’s provincial council, has complained that local officials weren’t consulted and included in the contracting process for the Siba field.
Provincial officials in Diyala province, where Mansuriya is located, said there has been no political opposition to investment.
Worth bearing in mind that these rates are also for much lower value gas and not oil.
Kuwait Energy will get paid $7.50/boe for gas production at the Siba field and $7/boe at the Mansuriya field.
Plateau production for both fields will be 70,000 boe/day - not bad work if you can get it.
http://www.ameinfo.com/246055.html
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ou are here: Home » Energy » Natural Gas » Akkas deal finally signed
Akkas deal finally signed
Officials from Iraq's Oil Ministry and the Korea Gas Corp. (Kogas) meet at the ministry's headquarters in Baghdad on Oct. 13, 2011 to finalize the Akkas gas deal. (REUTERS/Mahmoud Raouf Mahmoud)
By STAFF of Iraq Oil Report
Published October 13, 2011
On Thursday, the Korea Gas Corp. (Kogas) and the Oil Ministry finalized the long-delayed deal to develop Akkas, Iraq's largest discovered dry gas field, which holds 5.6 trillion cubic feet of Iraq's estimated 112 trillion cubic feet of gas reserves.
The company now has to turn the virtual non-producer into a field that pumps 400 million standard cubic feet per day within seven years and hold that output for 13 years, earning costs plus $5.50 for each barrel of oil equivalent produced.
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Anbar sets terms for investment
Anbar Gov. Qasim Abid (center) cuts a ceremonial ribbon during the grand opening of the Anbar Judicial Complex in Ramadi on June 13, 2009.
By BEN LANDO of Iraq Oil Report
Published October 27, 2011
The governor of Anbar province doesn't want oil or gas exported from his province.
In fact, the man who won the 2009 fDi Magazine "standout region of the year" award for luring foreign funds wants to keep the natural resources inside Iraq's largest province so that they can be used to feed additional investment projects, keeping more of the value chain within Anbar's borders.
"Anbar has big reserves of gas and oil. It is just a start -- Akkas (gas field) and the four blocks announced in th...
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