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Baghdad. International energy companies thinking of bidding for a piece of Iraq’s oil fields face a tough choice: either they accept the massive risks of investing in the still-fragile country or give up the opportunity of a lifetime.

One analyst even likens it more to a marriage proposal than a business deal.

“You’ve got Iraq, you’ve got the best fields in the world, and in some respects, from an oil man’s perspective, Iraq is the woman of your dreams,” explained Alex Munton, Middle East analyst for research group Wood Mackenzie.

But the wedding is going to cost a huge amount of money, and she has a lot of troubled relationships that you’re going to have to deal with. What are you going to do?”

It is those “troubled relationships” that will give investors pause when deciding how much to bid, if at all, for service contracts offered by the Iraqi Oil Ministry on 10 fields in an auction that kicks off in Baghdad on Friday.

Though Iraq has the world’s third-largest proven crude reserves, behind only Saudi Arabia and Iran, there has been little exploration or development of fields in the past three decades.

As a result, several of the fields on offer in the auction ending on Saturday are enormous. The two biggest, Qurna and Majnoon, have reserves of 12.9 billion and 12.6 billion barrels, respectively.

But concerns remain.

Frequent coordinated bombings against mostly government targets in Baghdad kill many, grim reminders that insurgents remain capable of large-scale violence. Security remains fragile.

In addition, exports of oil to the Turkish port of Ceyhan have been interrupted numerous times in recent months because of sabotage against northern pipelines.

“Iraq sums up as a place of huge opportunity and big risk, and the oil business is always risky. It has never been risk-free.” said Ruba Husari, the Baghdad-based founder and editor of iraqoilforum.com. “But at the same time, it’s worth noting that the fields’ areas have been totally safe.”

Oil ministry spokesman Assem Jihad has insisted the attacks will not derail the bidding.

Foreign companies might also be dissuaded by the small profit margins that Iraq’s service contracts offer. Companies will be paid a fixed fee per barrel, not a share of the profits, and the fee will only be paid once an agreed production threshold is reached.



Agence France-Presse