Iraq drives hard bargain at historic oil sale

By Missy Ryan and Ahmed Rasheed

BAGHDAD (Reuters) - Iraq auctioned contracts to run eight giant oil and gas fields Tuesday as it sought to take charge of its own reconstruction after six years of war, but oil companies were reluctant to pay what it asked.

The controversial auction took place on the same day U.S. troops, who led the invasion to topple Saddam Hussein in 2003, quit Iraq's cities and left security chiefly to the country's own forces.

A BP-led consortium including China's CNPC accepted a contract to develop the biggest oilfield, the 17-billion barrel Rumaila in the south, but only after an Exxon Mobil-led group rejected the government's proposed fee.

The sale was billed as the first chance since Iraq nationalized its oil in 1972 for major foreign companies to gain an interest in the world's third largest reserves, much of which are untapped, but many Iraqi critics said it was a bad bargain.

Foreign companies servicing the fields will be paid per barrel of oil produced above a certain amount.

The BP/CNPC alliance had to accept a fee of $2 for every barrel of additional oil produced, compared with a fee of $3.99 in their initial offer.

The Oil Ministry failed to find takers for its smaller Bai Hassan and Maysan fields after Chinese and U.S.-led consortia rejected its terms. Both groups also wanted a much higher fee for each extra barrel produced than it was willing to pay.

The only group to bid for the Kirkuk oilfield, which lies in a northern region contested by minority Kurds and the Arab-led government in Baghdad, was led by Royal Dutch Shell.