South Korea's Kogas and KazMunaiGas Exploration & Production won a deal on Wednesday to develop Iraq''s western Akkas gas field in Iraq's third energy auction since the 2003 US-led invasion.
The consortium, which bid against French oil major Total and Turkey's TPAO, set a remuneration fee of $5.50 per barrel of oil equivalent. Its proposed plateau production target was 400 million standard cubic feet per day.
"I expect to sign the contract in two to three months," Kogas vice-president, head of Iraq project group, Kim Myeong Nam, said.
He declined to comment on investment in the field but said he expected the deal to be profitable.
Iraq hopes to leap into the ranks of top energy producers and shake off a legacy of war and isolation, and offered two other gas fields in the auction.
A group led by Kuwait Energy won the bid for Siba gas field in Iraq's relatively peaceful southern oil hub of Basra.
It set a remuneration fee of $7.50 per barrel of oil equivalent and its plateau output target was 100 million cubic feet per day of gas.
The third field to be auctioned is Mansuriyah near the Iranian border in volatile Diyala province.
In total, the three fields have estimated reserves of 11.23 trillion cubic feet of gas, about 10% of Iraq's total 112 trillion cubic feet of proven natural gas reserves, the world's 10th largest.
But the gas auction, which began shortly after 10am local time has generated little interest from energy firms despite their eagerness to tap the country's vast reserves.
Interested bidders face tough terms, shaky security and provincial opposition to the bidding round.
The bidding round had already been delayed twice to give companies more time to study contract terms.
Thirteen companies registered for the auction including Italy's ENI, Edison, Norway's Statoil and Russia's TNK-BP.
But not all registered firms were expected to actually bid on Wednesday, industry observers said.
Winning bidders will 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.
Despite the challenges ahead, the auction could still be a first step into one of the few untapped gas reserves on the planet and not all firms can afford to miss out.
Baghdad had said the priority for the gas on offer was for domestic consumption, but some firms bidding for the auction also eye exports to neighbouring countries.
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