Russian oil giant wins Iraq oil exploration bid

BashneftA consortium of three companies including Russian firm Bashneft has won the rights to explore oil in Iraq. (Image source: Bashneft.ru)Russian oil major Bashneft has won the rights to explore oil in the south of Iraq after intense negotiations that lasted nearly a month

A consortium led by United Kingdom's PremierOil, and comprising Bashneft and Vietnam's PetroVietnam, bid for Block 12 in Iraq's fourth energy bidding round in May. The block is located in the southern provinces of Muthanna and Najaf.

The consortium initially rejected the government's proposed fee of US$5 per barrel of oil equivalent citing that it was too low and sought $9.85 for each barrel. Iraq's Oil Ministry's contracts department later reached a separate agreement with Bashneft after it accepted the $5 fee.

The auction, Iraq's fourth since 2009, was targeting foreign investment in the country's energy sector.

Out of the 12 exploration blocks that were on offer only three were awarded to consortiums led by Kuwait Energy, Russia's Lukoil and Pakistan Petroleum. Iraq has offered foreign companies service agreements where companies are paid a flat fee rather than production-sharing deals that allow them to profit from the output.

All four deals will be initially signed in July and then sent to the Iraq cabinet for final approval.

Since 2008, Iraq has awarded 15 oil and gas deals to international energy companies.

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