The Future of Iraq Project (B)

Posted: 17 Feb 2010

See all articles by Noel Maurer

Noel Maurer

Harvard University - Business School (HBS)

Sogomon Tarontsi

Harvard Business School

Date Written: December 2, 2009

Abstract

The first round of bidding on the rights to develop Iraq's oil field did not go as planned. All the bidding groups wanted to charge a fee per barrel that the Iraqi government considered too high. As a result, the Iraqi government conducted the auction a second time, this time making it clear that it would not consider fees above $2.00 per barrel. (In addition, the winner needed to deposit $500 million with the Iraqi oil ministry.) Only one bid was accepted: a consortium of the company formerly known as British Petroleum (now BP), the China National Petroleum Company (CNPC), and the Iraqi-state-owned South Oil Company. The consortium had previously bid $3.99 for the same field. It now had to negotiate the actual terms of the contract with the Iraqi government. In addition, the executives in London and Beijing needed to decide whether it made sense to exercise the option they had just purchased. Would they be throwing good money after bad by investing in the Rumaila super-giant field at such a low fee per barrel, or would there be strategic returns down the line?

Suggested Citation

Maurer, Noel and Tarontsi, Sogomon, The Future of Iraq Project (B) (December 2, 2009). HBS Case No. 710-016, Harvard Business School BGIE Unit, Available at SSRN: https://ssrn.com/abstract=1553886

Noel Maurer (Contact Author)

Harvard University - Business School (HBS) ( email )

Soldiers Field Road
Morgan 270C
Boston, MA 02163
United States

Sogomon Tarontsi

Harvard Business School ( email )

Soldiers Field Road
Morgan 270C
Boston, MA 02163
United States

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