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Why Iraq sees success in oil auction

Officials laud a transparent process on bids to develop oil fields – and the opening of investment to foreign firms shut out for more than 30 years.

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Iraq is declaring a historic auction to develop some of the world's richest oil fields a success – despite a bidding process from which most international oil companies walked away emptyhanded – and is proceeding with plans for a second round of bidding at the end of the year.

"We showed the world two things – that the Iraqi oil industry is open for investment for the first time, and second, that the process was transparent," says Foreign Minister Hoshyar Zebari.

Representatives of the world's major oil companies flew to Baghdad last week to bid on the right to develop hundreds of billions of dollars worth of oil and gas for the first time since Iraq nationalized its oil industry in 1972 and expelled foreign oil companies.

Of the six giant oil fields and two gas fields on offer, only one – the Rumaila field in southern Iraq – was awarded after the other bidders decided that the profit margins being offered by the Iraqi government were lower than they would accept.

"The IOCs [international oil companies] are not happy with results, as the Ministry of Oil, [but] we are very happy," says a senior ministry official, Abdul Mahdy al-Ameedi.

A consortium headed by British Petroleum and China's CNPC was awarded the contract to develop the giant field after agreeing to cut their profit to $2 per barrel instead of the $4 they were seeking.

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