UPDATE 4-Iraq auctions off three major gas fields

* Third auction since U.S.-led invasion of Iraq

* Kogas, Kuwait Energy, TPAO, Kazakhs win gas fields

* Iraq hopes to gain global weight as major producer

(Adds details, analyst quotes)

By Rania El Gamal and Ahmed Rasheed

BAGHDAD, Oct 20 (BestGrowthStock) – Iraq auctioned three major
natural gas fields to foreign companies on Wednesday as it seeks
to shake off a legacy of war, bolster its standing as an energy
giant and break into the lucrative global gas market.

Global energy executives braved lingering violence and
political uncertainty to attend the auction in Baghdad, the
third bidding round since the 2003 U.S.-led invasion, but
Western companies either did not compete or failed to win.

In the previous two energy auctions last year, Iraq sold
contracts to develop some of its biggest oilfields, setting the
stage for its crude output capacity to quadruple to Saudi levels
of 12 million barrels per day if everything goes to plan.

Wednesday’s gas auction kicked off with South Korea’s Kogas
(036460.KS: ) and Kazakhstan’s KazMunaiGas Exploration &
Production (KMGq.L: ) winning a deal to develop the largest of the
three, Akkas gas field in the Sunni heartland of western Iraq.

Kuwait Energy and Turkey’s TPAO won the bid for Siba gas
field in Iraq’s relatively peaceful southern oil hub of Basra,
while TPAO, Kuwait Energy and Kogas won the third gas field,
Mansuriyah, near the Iranian border in volatile Diyala province.

The only Western company to bid was French major Total
(TOTF.PA: ). Analysts said Iraq’s lack of gas infrastructure and
security concerns kept other big global names away.

“There are a couple of uncertainties when it comes to Iraq
such as the infrastructure, political situation and the
situation of Iraq’s gas industry in terms of technological
innovation,” said Cuneyt Kazokoglu, an analyst at JBC Energy.

“So because of these the interest is rather limited.”

Major violence has abated from the peak of sectarian
bloodshed three years ago, but foreign oil companies still face
shaky security in a country struggling to tame a stubborn
Islamist insurgency.

The winning bidders also have to build almost non-existing
gas infrastructure and a pipeline network from scratch and brave
the risks of operating in violent areas where some provincial
opposition against the auction is already ramping up.

Iraq says the gas will be used to generate electricity
domestically and as feedstock for industry, but some firms are
also hoping to export to neighbouring countries.

Thamir al-Ghadhban, a top adviser to Prime Minister Nuri
al-Maliki, said on the sidelines of the auction that Iraq did
not rule out exporting gas once domestic needs were satisfied.

“There is no doubt it was a very successful auction,” he
said. “I don’t see a problem in the future with exporting gas.”

TPAO vice president Besim Sisman said the group eyed exports
from Siba either through Kuwait or the planned Nabucco natural
gas pipeline to Europe.

“Nabucco is very important for us,” he said.

On Mansuriyah, he said his company and its partners expected
to invest $2.5 billion to develop it.

EXPORTS

Iraq’s economy is dominated by oil and its gas sector has
long been neglected. But the government want to diversify the
economy and broaden its source of revenues.

Thirteen companies registered for the auction including
Italy’s ENI (ENI.MI: ), Edison (EDN.MI: ), Norway’s Statoil (STL.OL: )
and Russia’s TNK-BP (TNBPI.RTS: ), but not all registered firms
bid on Wednesday. [ID:nLDE69106S]

The bidding round was delayed twice to give companies more
time to study the contract terms. [ID:nLDE68I02T]

The fields have estimated combined reserves of 11.23
trillion cubic feet of gas, about 10 percent of Iraq’s total 112
tcf of proven natural gas reserves, the world’s 10th largest.

Kogas and KazMunaiGas, who bid against a consortium of Total
and TPAO, set a remuneration fee of $5.50 per barrel of oil
equivalent at Akkas and proposed a plateau production target of
400 million standard cubic feet per day. The total investment
will be about $4.4 billion, South Korea’s Ministry of Knowledge
Economy said in the statement.

Kuwait Energy and TPAO set a remuneration fee of $7.50 per
barrel of oil equivalent for Siba and its plateau output target
was 100 million cubic feet per day of gas. TPAO said the group
would invest $1 billion.

The partners planning to develop Mansuriyah accepted a fee
of $7 per barrel of oil equivalent and set a plateau production
target of 320 million cubic feet of gas per day. Investment in
that field was expected to be $2.5 billion, TPAO said.
(Additional reporting by Serena Chaudhry on Baghdad, Humeyra
Pamuk in Dubai and Isabel Coles in London; Writing by Maria
Golovnina; Editing by Michael Christie and Jon Hemming)

UPDATE 4-Iraq auctions off three major gas fields