Iraq has approved a contract for BP and China's CNPC to develop its massive Rumaila oil field. But the country's government has rejected other bids for deals it had hoped would revive its struggling oil and gas sector.
The cabinet refused offers for several further fields submitted by other foreign companies, some of which had been revised after a major tender on Tuesday.
BP and the China National Petroleum Corp (CNPC) were the only consortium to walk away with a a deal when they won the right to work on Rumaila, Iraq's biggest producing oil field with reserves of 17 billion barrels.
The British oil major and its Chinese partner sealed the deal only after an Exxon Mobil-led group had dropped out of the running. BP and CNPC agreed to a cut-price fee of just $2 for every extra barrel of oil produced from Rumaila. They had originally sought twice that amount.
The sale of contracts on Tuesday to develop six large oil fields and two undeveloped gas fields was a central plank in Iraq's plans to more than double oil output of around 2.4 million barrels per day.
Dependent on oil for more than 95% of state income, Iraq needs money to rebuild after six years of bloodshed. It also needs the capital and expertise that foreign firms can bring to repair damage to its oil infrastructure caused by decades of war, sanctions and neglect.
The auction largely flopped, however, when international oil firms balked at the low fees Iraq was willing to pay them for boosting crude output. Rumaila was the only field on which an agreement was reached.
Oil drops back after US data
Oil prices fell below $70 this evening, reversing earlier gains, as US government oil data showed increases in US fuel stockpiles.
US crude was 34 cents lower at $69.55 a barrel, having risen earlier to as high as $71.85. London Brent crude fell 27 cents to $69.03.
The US Energy Information Administration (EIA) data showed a 2.3 million barrel increase in petrol stocks and a 2.9 million barrel rise in middle distillate stocks, such as diesel. Both figures were larger than analysts' forecast. Overall oil product demand over past weeks fell 5.8% from a year earlier.
The increases in product inventories overshadowed a 3.7 million barrel drop in crude oil inventories. The drop was bigger than analysts had expected.
Some pressure also came from an increase in output by OPEC producers in June reported in a Reuters survey.
Oil prices, which tumbled from a record high of over $147 struck in July last year to below $33 in December, have rallied in recent months due mainly to hopes for economic recovery. They recorded a 42% gain in the second quarter, the highest quarterly gain since 1990.
