For the Iraqi government and its oil officials, this week's events could be a classic case of "If at first you don't succeed, try, try again."
Earlier this summer, the country's government conducted an oilfield auction, inviting worldwide members of Big Oil to help increase the output of a half-dozen of its already developed oil fields and a couple of gas fields. The exercise became a near-disaster.
Despite dozens of oil companies participating, including ExxonMobil
This next auction round has 45 companies prequalified to participate. While they haven't been named as yet, it's logical to assume that companies such as CNOOC
A major difference between the two rounds involves the next group of fields being as yet undeveloped, although there would appear to be a possibility that the fields not awarded in the first round could be reentered in the next session. The auction itself is expected to occur before the end of the year, and it will likely result in 20-year contracts. Winning bidders almost certainly would be paid a fee for each barrel of oil they produced from the fields.
Now that U.S. troops have left Iraq's urban areas, the recent surge of sectarian violence gripping some parts of the country could be a major concern. Last week alone, bombings killed more than 100 people in Baghdad. As such, I wouldn't be surprised to see companies either begin to exit the process out of concern for the safety of their employees and contractors, or at least demand higher fees to compensate for the increased danger.
The key for Fools, especially with crude prices creeping up, is to watch these big companies carefully. I'm partial to Exxon, but I'm becoming more convinced that there will be money to be made in the near term from most of the integrated players.
Fool contributor David Lee Smith doesn't own shares in any of the companies mentioned. He does, however, welcome your comments. CNOOC is a Motley Fool Global Gains recommendation. Try any of our Foolish newsletters today, free for 30 days. The Fool has a disclosure policy.