Foreign energy companies snubbed Iraq yesterday by rejecting all but one deal to develop the country's oil and gas sector, in what had been the first such opportunity in nearly four decades.
Bidding descended into near farce in Baghdad when Oil Minister Hussein al-Shahristani asked companies to resubmit their bids after deals were rejected by Chinese, American, Italian, British, Dutch and South Korean energy firms.
The service contracts offered by Baghdad were based on companies accepting a fixed fee per barrel of oil extracted from six fields offered, rather than an equity stake.
Doubts had been raised by foreign companies in the run-up to the bidding about having to partner with Iraqi state-owned firms and the requirement to share management of the fields, despite fully financing their development.
British energy giant BP and China's CNPC International Ltd were the only bid winners, accepting a two dollars per barrel deal to work in the giant Rumaila oil field in southern Iraq, which has known reserves of 17.7 billion barrels.
However, after a day of bidding there were no successful tenders for the remaining five oil fields due to a gulf in what foreign firms wanted and what the government was willing to pay.
China's CNOOC and Sinopec wanted 25.40 dollars per barrel extracted from the Maysan field in southern Iraq but the government offered them only 2.30 dpb.
The US energy giant ConocoPhillips, meanwhile, asked for 26.70 dollars per barrel to work in the Bai Hassan oil field but the government offered 4.0 dpb.
The government was dealt another blow when a consortium featuring Sinopec, Italy's Eni Medio Orient SpA, America's Occidental Petroleum and South Korea's Korea Gas Corp (Kogas) withdrew from bidding for the Zubair oil field.
It asked to be paid 4.80 dollars per barrel extracted but the oil ministry offered only two dollars.
Separately, no bids were received to work in the Mansuriya gas field and an offer for the other gas site, from Italy's Edison SpA, was dropped.
The tender process attracted offers from 31 firms including US and European giants ExxonMobil and Shell and a swathe of companies from China, India, South Korea and Indonesia.
Prime Minister Nuri al-Maliki underlined at the session's opening that Iraq needs oil money to rebuild the country after three wars and more than a decade of debilitating economic sanctions.
Shahristani denied that yesterday's bidding had been a failure, insisting that the oil ministry's primary objective to increase production from 2.4 million barrels per day to more than four million in the next five years would be met.
"I am very satisfied because of Rumaila we will produce more than four million barrels a day," he said.
Increasing production to that level will, according to him, pump an extra 1.7 trillion dollars into government coffers over the next 20 years.
Shahristani has said that only 30 billion dollars of that sum will go to the companies which have extracted the oil.
The rest "is a huge amount that would finance infrastructure projects across Iraq – schools, roads, airports, housing, hospitals," he said, insisting that the country would retain control over its oil reserves.
Although Shahristani invited the leading bidder for the five oil fields and one gas field that had preliminarily been rejected to resubmit a new bid by 6 pm (1500 GMT), several foreign representatives told AFP this was impractical as there was insufficient time to prepare a new offer.