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Iraq offers up 3 gas fields to global firms

Baghdad, October 20, 2010

Iraq on Wednesday offers up three of its gas fields in its third energy auction since the 2003 US invasion, hoping to leap into the ranks of top energy producers and shake off a legacy of war and isolation.

But the gas auction, set to start at 10 am local time (0700 GMT), has generated little interest from international firms despite eagerness to tap the country's vast reserves, analysts said. Interested bidders will face tough terms, shaky security and regional opposition to the bidding round.

Iraq will tender gas fields at Akkas in the western desert, Iraq's Sunni heartland and once an al Qaeda stronghold, Mansuriyah near the Iranian border in volatile Diyala province, and Siba in the relatively peaceful southern oil hub of Basra.

In total, the three fields have estimated reserves of 11.23 trillion cu ft of gas, about 10 per cent of Iraq's total 112 trillion cu ft of proven natural gas reserves, the world's 10th largest.

The bidding round has already been delayed twice to give companies more time to study contract terms.

Thirteen companies registered for the auction including Italy's ENI, Edison, France's Total, Norway's Statoil, South Korea's Kogas and Russia's TNK-BP.

But not all registered firms are expected to actually bid on Wednesday, industry observers said.

Winning bidders will have to build almost non-existing gas infrastructure and a pipeline network from scratch and brave the risks of operating in violent areas where some provincial opposition against the auction is already ramping up.

Despite the challenges ahead, the auction could still be a first step into one of the few untapped gas reserves on the planet and not all firms can afford to miss out.

Baghdad had said the priority for the gas on offer was for domestic consumption, but some firms bidding for the auction also eye exports to neighbouring countries.

Iraq, starved of electricity after years of war, sanctions, neglect and sabotage, hopes opening its gas sector to foreign investment will boost its power generating capacity.

The country's national grid only supplies a few hours of electricity each day.

The Opecv member is in desperate need for billions to rebuild its battered economy and crumbling infrastructure.

It signed a series of development contracts with global oil companies after two bidding rounds last year in a bid to boost it crude production potential to Saudi Arabia's levels of 12 million barrels per day (bpd) from around 2.5 million bpd now.

Such deals, and possibly the gas contracts Iraq is expected to award on Wednesday, have cemented the country's position as an emerging oil and gas power. – Reuters




Tags: Iran | Baghdad | Basra | Auction | Gas fields |

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