Iraq could challenge Russia's number two spot among world oil producers after auctioning two prized oilfields on Friday. Royal Dutch Shell and Malaysia's Petronas won the deal for Majnoon, one of the world's largest untapped oilfields, on the first day of Iraq's second oil contract auction since the 2003. French oil major Total, partnered with China's CNPC and Petronas, won the smaller Halfaya oilfield. But no successful bids were made for more dangerous fields, including East Baghdad, which lies in part under the capital's Sadr City slum and would be difficult to protect from attack. Royal Dutch Shell and Malaysia's Petronas on Friday won the rights to develop one of the world's largest remaining untapped oilfields as Iraq staged its second auction of oil contracts since the 2003. The companies proposed a fee of just $1.39 per barrel and pledged to increase output from the supergiant Majnoon field to 1.8 million barrels per day, more than double what Iraq had expected. The fee was below what Iraq was willing to pay. “We announce that the consortium of Shell and Petronas have won (the contract) to develop Majnoon, and the fee is less than the Oil Ministry specified,” Iraqi Oil Minister Hussain Al-Shahristani said at the heavily-protected auction. French oil major Total, partnered with China's CNPC, also bid and was likely to have been disappointed at losing a field it sought to develop under ousted dictator Saddam Hussein. As some consolation, it had a stake in a CNPC-led consortium that won the rights to the smaller Halfaya oilfield. Iraq is offering 10 oilfields over two days in a rare opportunity for oil firms, from Western majors to Chinese and Indian state-owned giants, to gain access to plentiful and cheap to pump Middle East oil reserves. The world's largest energy companies also steered clear of fields in northern areas. “The new Iraq - after all it has suffered from wars and misadventures that led to destruction and upheaval -... is in grave need of developing its oil industry,” Shi'ite Prime Minister Nuri Al-Maliki said as he opened the tender. One of the choicest prizes, West Qurna Phase Two, with 12.9 billion barrels of reserves, will be offered on Saturday morning. Fierce competition was expected for the last of the supergiant fields on offer. Supergiants have reserves of 5 billion barrels or more. Only two of five fields on offer on Friday were awarded. But the projected boost in capacity, combined with other deals signed or in the pipeline, have put Iraq on track to quadruple production potential to 10 million barrels per day in six to seven years, Oil Minister Hussain Al-Shahristani said. That would match Russia and leave only Saudi Arabia ahead. “Iraq will be at the forefront of producing and exporting countries,” he said. Baghdad needs the billions of dollars of revenue that more oil output would generate to rebuild after decades of war and sanctions and years of neglect and sabotage. Executives from around 30 top oil companies braved security threats to compete for the 10 fields on offer over two days. Collectively, the fields contain about as much oil as that held by OPEC-member Libya. Forty-four firms were able to bid including Exxon Mobil, BP and Chevron. With 12.6 billion barrels of reserves, Majnoon in relatively stable southern Iraq is one of the largest untapped oilfields left on earth. Shell and Petronas proposed a fee of $1.39 per barrel and pledged to increase output to 1.8 million bpd, more than double what Iraq had expected. They outbid Total, a favorite to take the field which it had sought to develop under ousted dictator Saddam Hussein. Halfaya, with 4.1 billion barrels of reserves, was some consolation. CNPC, Total and Petronas won it with a fee of $1.40 per barrel and a plateau production target of 535,000 bpd. In contrast to the first auction in June, when only one deal was awarded and most firms balked at stiff terms, the fee bid by companies this time was below what Iraq was willing to pay. “In the first round, there was a big misunderstanding between what the ministry had intended and how the industry understood the contract, and you ended up with a big gap,” said Mounir Bouaziz, vice president for Shell Gas & Power. “This time... they got extremely competitive offers.”
