Friday will bring with it yet another fight in Iraq, but this one won't involve the military. Instead, it should consist of 44 of the world's biggest oil companies vying for the opportunity to develop 10 of the country's huge oil fields.
As you probably know, this'll be the second such bidding contest this year. The first took place in June, and was generally a disappointment, with only one contract being awarded. That one went to a group led by BP (NYSE: BP ) and was tied to the Rumaila oil field, the country's largest. Rather than being paid in oil, the companies were to receive monetary compensation for the amount of increased production they were able to generate from their fields. The difficulty was the gap between the amount per barrel the companies expected to be paid and the government's willingness to shell out.
Subsequently, however, contracts have been awarded to a group led by ExxonMobil (NYSE: XOM ) and Shell (NYSE: RDS-A ) , which last month saw compensation the Iraqi way and garnered the right to work in the big West Qurna Phase-1 field. At about the same time, another pact was awarded to an Eni (NYSE: E ) group.
Friday's session will start off with the massive Majnoon field, which in the days of Saddam Hussein had a negotiated but unsigned contract with Total (NYSE: TOT ) . The French firm, along with its partner Chevron (NYSE: CVX ) , is anticipated to bid aggressively for the field. Among the other big fields will be West Qurna Phase-2 field. Russia's Lukoil had a production-sharing agreement on that field during the Hussein regime. It'll now be bidding with ConocoPhillips (NYSE: COP ) , although the Exxon group might work extra hard to add the field to its West Qurna-1 treasure.
And then there's the East Baghdad field, which runs beneath the suburban streets of the nation's capital city. The field is thought to contain about 8.1 billion barrels of crude. However, there appear to be concerns among potential bidders that the location could be more unstable than most of the others. The Friday-Saturday session will tell a lot about whether jackhammers will be applied to the streets above the field.
It's a shame that with college football games scarce this weekend, your local TV listings likely won't show any coverage of Iraq's bidding session. But if you believe as I do that crude prices will head higher during the next couple of years, you'll want to keep a close eye on the companies that stand to find work in oil-rich Iraq.
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