Twelve deals were on the table, seven for oil and five for natural gas, but only three were reached. Lack of security in new fields, the Kurdish factor and Baghdad's unbending price demands are the reasons for the failure. Iraq will not outstrip Iran in OPEC anytime soon.

Baghdad (AsiaNews/Agencies) - Iraq's fourth oil and natural gas auction was a flop. The two-day event closed Thursday with only three contracts awarded for 12 exploration blocks on offer (seven oil, five natural gas), covering 80,700 square kilometres with 29 billion cubic metres of gas and 10 billion barrels of crude. Iraqi Kurdistan was excluded because of an ongoing dispute between the central and regional governments.

In its three previous bid rounds since 2003, Iraq auctioned rights to produce at oil fields already discovered or in operation. It awarded 15 such contracts, including a license for the Rumaila field, Iraq's largest, to BP and China National Petroleum Corp

Before the auction, expectations were high. Iraq had in fact boosted crude output to more than 3 million barrels a day and was poised to overtake Iran as OPEC's No. 2 producer. Some even hoped it could challenge Saudi Arabia. Now, modesty appears to be prevailing, at least for the time being.

The first deal was struck in Wednesday's round, at the start of the auction. A Kuwait-led consortium won rights to search for oil and gas in the south.

The other two were reached in Thursday's round. In the first, a group comprised of Russia's Lukoil and Inpex Corp. of Japan made a successful bid for oil exploration in southern Iraq. The group will be paid .99 for each barrel of oil equivalent it finds. In the second deal, Pakistan Petroleum won a contract for natural gas exploration in the east of the country.

The failure of the two-day auction is due to a number of factors, expert said, such as poor planning, security concerns and the government's rejection of bidders' prices and demand for concessions.

Yesterday's auction was the worst since 2009. Eight blocks received no bids because none of the 39 approved bidders, including Royal Dutch Shell and Chevron, accepted Baghdad's terms.

This auction involved undeveloped fields in remote areas where the security situation is even more uncertain than in the country's main cities.

The auction also fizzled out because of Baghdad's refusal to pay more than US$ 5.38-US$ 6.24 per barrel produced, far short of what companies wanted.

Lastly, another inhibiting factor was the exclusion of companies, like Exxon, that signed deals with the government of Iraqi Kurdistan in northern Iraq, a precedent that has encouraged other regions that are not under Baghdad's control.

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