Comment & Analysis: The economics of Iraq oil investment

As more than 40 of the world’s largest oil companies in the world prepare to bid next week in an auction for 10 of Iraq’s oil projects, BP and the Chinese National Petroleum Corp., are preparing to begin work on the Rumaila oil field. The two companies teamed up in Iraq’s first auction, on June 30, and were awarded the only field of the eight on offer.

They did so by doing something their competitors would not at the time. Many, as early as the evening of first bid round on June 30th 2009, had asked the intriguing question: how is it possible that BP/CNPC could so substantially slash their remuneration fee (RF) – the per barrel fee Iraq would pay for increasing production.