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If the seven oil projects awarded to foreign oil companies this weekend, and the three from an auction earlier this year, develop as planned, within eight years Iraq will see its oil production capacity leap to more than 12 million barrels per day (bpd).
"We think it is a big victory for Iraq to be able to be a leader in the world," Iraqi Oil Minister, Hussain al-Shahristani, said after the auction.
Saudi Arabia, the world's largest producer at 8.18 million bpd, has a capacity of just over 11 million bpd today, after slower demand growth halted plans to expand to 12.5 million bpd by the end of this year.
Iraq - behind Saudi Arabia and Iran - has the world's third largest proven oil reserves, with potentially more remaining to be found. Currently, however, its 115 billion barrels below ground pump at just 2.4 million bpd, with production hampered by political, structural and security problems that could moot the enthusiasm from this weekend's auction.
Out of the 10 oil projects on offer during the two-day auction, seven were awarded to a dozen companies. Three fields up for grabs in a June 30 auction were awarded, with one deal already finalised. And there are more than 60 fields discovered but not yet developed. These include two that the ministry is negotiating directly with foreign companies outside of an auction process.
Political impact
Currently, Iraq relies on oil revenue for 95% of its revenue. This will increase if the fields develop as planned. Only, however, after Iraq reimburses companies for their investment and pays them a relatively small fee per barrel of increased output.
But this is Iraq, where, aside from this weekend's bidding round, it seems nothing goes according to schedule.
Since late 2006, a new oil law to replace current oil governance - an often vague and conflicting mix of the 2005 Constitution and laws left from previous eras - has been delayed by political squabbles. Laws reestablishing the national oil company, reorganising the oil ministry and formalising revenue redistribution, are also languishing.
Iraq's Kurds, who favour heavy decentralisation, and nationalist Arabs, who want strong state control, have both questioned Shahristani's oil deals. Some have called them illegal.
In press conferences and speeches before the auction, both Prime Minister Nouri al-Maliki and Oil Minister Shahristani, reiterated the government's pledge that the deals would remain valid - no matter what happens in the March 7 national election.
Legal cover has been as much of a concern to foreign oil companies as physical security. Three days before the first field was put on the block, five bombs killed more than 120 people. Iraq's northern export pipeline was offline for a week, during both October and November, due to sabotage.
"The contract specifies very clearly the responsibilities of the companies and the security for the fields is the responsibility of the Iraqi government but if the oil companies require specific security for their personnel or their activities, that is their responsibility," said Shahristani.
"We will make necessary precautions to deal with it," said Torgeir Kydland, the senior vice president for Iraq at Statoil, the Norwegian firm which partnered with Russia's Lukoil to increase production at the West Qurna-Phase 2 project from nearly nothing now to 1.8 million bpd.
Infrastructure investment
That additional crude, however, now needs somewhere to go.
Staff
