U.S. Companies Shut Out as Iraq Auctions Its Oil Fields

From the article: Russia's Lukoil, CNPC, and RoyalDutchShell accepted fees of between $1.15 and $1.40 for every barrel they produce — that's about 2% of Friday's oil futures price of $73 a barrel. "No one thinks it will be easy to make money on these contracts," says Samuel Ciszuk, Middle East energy analyst at IHS Global Insight, an economic forecasting company in London. "Companies have been willing to come in very, very low just to get their foot in the door in Iraq."

To clarify, the party that assumes all of the exploration risk (the oil company, whether a private or government entity) gets $1.40 out of $73.00 per barrel produced, or 1.92% of the revenues.

On the other hand, the Iraqi government, which assumes absolutely no business risk whatsoever in this venture, takes 98.08% of the proceeds of every barrel sold. All they're providing are drilling locations and what amounts to a 1.92% working interest.

The lessee (the oil company) has to provide its own personnel, equipment, materiel, and enhanced security to protect its investment, and has to pay for these items out of a working interest of 1.92%.

Frankly, I'm surprised the Russians and the Chinese were stupid enough to accept these terms. And it's absolutely no surprise that no American companies were interested in this deal. It's an extraordinarily lousy deal.

Actually I believe this is a very low risk for the oil company.

I think they get 100% of all expenses paid and the agreed fee is for oil produced after expenses are paid.

I still would like to hear which companies you consider “the big 6 oil companies”.

I suspect none of them are in the top ten for their control of oil. I also doubt together the produce more than 15% of the world’s oil.

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