BAGHDAD – Iraq's government signed deals for only three of 12 oil and natural gas exploration sites offered in a two-day energy auction that ended Thursday, reflecting reluctance of foreign bidders to risk their money in unexplored areas.
The auction was Iraq's fourth since 2009 and was meant to attract foreign investment in the country's crucial energy sector, particularly natural gas exploration. In previous rounds, bidders competed for known oil and gas fields.
The lukewarm response was also blamed on tough contract terms set by the Iraqi government. Companies are paid a flat fee in so-called service contracts, rather than receiving a share of the oil and gas they find.
Oil Ministry spokesman Assem Jihad said the government is not disheartened. "We do not consider three successful bids as a disappointing matter, taking into consideration that foreign companies in general do not like to take risks on unexplored areas," he said.
Jihad said Iraq is preparing for additional auctions, and more than 60 exploration blocks were ready for bidding. He did not say when the next auction would take place.
In Thursday's round, a group comprised of Russia's Lukoil and Inpex Corp. of Japan made a successful bid for oil exploration in southern Iraq, the spokesman said. The group will be paid $5.99 for each barrel of oil equivalent it finds.
In a second deal, Pakistan Petroleum won a contract for natural gas exploration in the east of the country and is to receive $5.38 for each barrel of oil equivalent, Jihad said.
On Wednesday, a Kuwait-led consortium won rights to search for oil and gas in the south.
Several of the exploration blocks attracted no bidders, including two for natural gas that were offered again on Thursday after no deals were made for them the day before.
Iraq is trying to build up its energy sector, hit by years of neglect and violence, including the turmoil following the ouster of Saddam Hussein in 2003. Iraq holds the world's fourth largest oil reserves, and oil revenues cover nearly 95 percent of the country's local budget.
Since 2008, Iraq has awarded 15 oil and gas deals to international energy companies, the first major investments in the country's energy industry in more than three decades.
Daily oil production stands at about 3 million barrels. Iraq initially set a target of 12 million barrels a day by 2017, but it is now considering a downward revision to fewer than 10 million barrels, in part because of infrastructure bottlenecks.