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Asian firms score big on Iraq oilfields

Asian firms Petronas and CNPC made aggressive bids to become major players in the international energy market by snatching up contracts for Iraq's oil fields at an auction over the weekend.

The Malaysian and Chinese companies, both massive state-owned firms but not yet household names worldwide, were part of consortiums that won four of the seven contracts handed out by the Iraqi government to develop its oil sector.

Their success in striking deals contrasted starkly with the absence of US firms from the bidding process - only one bid on any of the ten fields on offer in the two-day auction included an American company, and that was unsuccessful.

"The Chinese, it was clear from the beginning that they were going to be very aggr-essive," Ruba Husari, the Baghdad-based founder of www.iraqoilforum.com, said. "They are the new majors of the 21st century."

"Petronas is a national oil company which is acting lik an international major," she added.

Malaysia's Petronas was part of groups that won contracts on the Majnoon, Halfaya, Garraf and Badra oil fields, which have combined reserves of 17.65 billion barrels of crude, and could together produce some 2.7 million barrels of oil per day (bpd).

It was also part of an unsucc-essful bid for the West Qurna-2 field, which on its own has proven reserves of 12.9 billion barrels of crude.

China's CNPC, meanwhile, was the biggest member of the successful consortium bidding for Halfaya. It has also already formally signed a deal, along with Britain's BP , to ramp up production at Iraq's biggest oil field, Rumaila.

Those two deals are in addition to a contract signed last year by CNPC to develop another Iraqi oil field, making it by some measures the biggest foreign energy firm operating in Iraq.

Two Indian companies, ONGC and Oil India, also registered to take part in the auction and participated in two bids overall, though both were unsuccessful.

Alex Munton, a Middle East analyst for research group Wood Mackenzie, said the difference between the Asian companies' push for contracts and the more cautious attitude of Western oil majors had to do with their contrasting perceptions of what Iraq had to offer.

"What does Iraq mean for China's national oil companies? More than anything else, it means access to resources," he said.

"The bigger issue of energy security comes into play for these national oil companies.

"For your majors, that's not how they look at it. They're running a business, the priority is delivering value for their shareholders.

"There's a different set of criteria that need to be considered with respect to judging whether these are projects worth investing in or not," he added.

Among the Western firms that walked away with contracts from Iraq's two-day auction that concluded on Saturday were Anglo-Dutch giant Shell, which was the majority partner with Petronas on Majnoon, and France's Total, which has a 25 per cent stake in Halfaya.

Aside from those two and Norway's StatoilHydro, which won a minority stake in the West Qurna-2 project, no American or west European companies struck deals with the Iraqi government.

Occidental Petroleum Corp-oration was the only US firm to even participate in the bidding, with a failed offer for Halfaya.

They did, however, partici-pate more readily in the first round of auctions in June - Exxon Mobil is the majority partner in the West Qurna-1 project, and Occidental holds a minority stake in the Zubair field, both in south Iraq.

"The main thing is that the Asian companies, the state-run companies, they can operate with a loss," Husari said. "It's not a problem. That's not their priority.

"Their priority is to be here, to make sure they have supplies secured for 20 years to come.

That's not some-thing the majors can do," Husari said.

"The majors approach it from the point of view of economics, the national oil companies approach it from the point of view of strategy and politics," she explained.

© 7Days 2009