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This week, multiple oil companies are battling for control over Iraq’s 15 fields, located in Baghdad. These fields contain at least 41.121 billion barrels of oil. This is the biggest cut of Iraq's existing oil assets of 115 billion barrels in decades! A total of 44 companies, which include Exxon Mobile Corp, Chevron, and Britain’s BP Group PLC, will be placing their auction bids this week. After all, how could they pass this up?
Iraq contains the world’s third-largest oil reserves, and oil sales make up nearly 95 percent of their budget! This sale is foreseen to be a win-win situation for the highest bidding company and for Iraq. In exchange for the oil, the corporation will agree to a 20-year service contract and receive a flat fee per barrel produced for their services. They will get to keep 75 percent of the sale profits, and the remaining 25 percent will go to Iraq. Not only will Iraq gain access to cash, but technical proficiency and opened doors for future business deals as well.
Extracting oil can be very difficult and costly. However, the 15 fields in Baghdad are considered “green fields,” because there is not much development that would require dismantling or retooling of old equipment. High-quality crude is easily extractable, and shouldn’t cost an arm and a leg to do it either. To make everything easier, the Iraqi government has simplified taxes that apply, and granted international companies increased project control.
Assuming everything goes smoothly, this deal will provide an international company with a chance to grow, and it is enabling Iraq to expand its international business opportunities as well. Everything seems to be lining up correctly; now all we have to do is wait to see who the highest bidder is!
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