By staff reporters Chen Zhu and Yang Yue

(Caijing.com.cn) China National Offshore Oil Corp, the parent of CNOOC Ltd (HK 0883), may bid again for the rights to develop Iraq's oil and gas fields, despite setbacks of the first round of auctions, CNOOC's general manager Fu Chengyu told Caijing.

The Iraqi government auctioned the rights to develop six oil fields and two gas fields on June 30 in a first round of bidding in Baghdad. But only one deal, for the Rumaila field, was sealed. Analysts have widely called the auction a failure, with the bidding process exposing a massive gulf between what the Iraqi government is prepared to offer foreign oil companies and what the oil companies are prepared to take.

"CNOOC will not act as a bystander, despite the fact the first round of bidding bore no fruit," Fu Chengyu, CNOOC's general manager, told Caijing on the sidelines of the Global Think Tank Summit in Beijing July 4.

The service fee is the amount paid to the concession holder for each extra barrel of oil it produces above a set level and is designed to increase the output of Iraq's oil fields.

CNOOC also joined a consortium with Sinopec and Conoco Phillips to bid for the rights to the Bai Hassan field. But again, agreement with the Iraqi government over the service fee to be paid to the oil companies could not be reached. The oil companies asked for US$26.7 per barrel while the Iraqis offered US$4.00.

Fu said the service fees as proposed by the Iraqi Oil Ministry are too low, but that will not stop CNOOC bidding again.

"If there is a second round of bidding, CNOOC may continue to participate," said Fu. 

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Full article in Chinese: http://www.caijing.com.cn/2009-07-04/110193176.html