BAGHDAD - Iraq, emerging from the shadows of war, expects to boost its oil output to rival the level of top producer Saudi Arabia after awarding some of its most attractive oilfields to global energy companies this week.

At the end of a two-day bidding round for 10 oil contracts -- the second auction since the 2003 U.S. invasion -- Baghdad had received pledges from oil firms to boost output by 4.765 million barrels per day, almost double Iraq's current output.

If all deals from the two auctions and others on the table are added to national production, Iraq would have output capacity of 12 million barrels per day in six years, overtaking Russia and challenging top exporter Saudi's 12.5 million bpd, Oil Minister Hussain al-Shahristani said.

Iraq is a powerhouse in the region and it will regain its place, its rightful place, Foreign Minister Hoshiyar Zebari told Reuters in Bahrain after the auction concluded.

Iraq has leveraged its huge and cheap-to-pump reserves to lure the world's top energy firms into deals at knock-down rates.

Some 30 international oil companies braved the threat of violence and attacks to come to Iraq, putting aside security concerns just days after car bombs killed 112 people in Baghdad.

Oil majors from the United States appeared conspicuously uninterested in the fields on offer in the second round, confounding expectations that they might end up with the lion's share of Iraq's oil sector as a result of the U.S.-led war.

Security may still be an issue. The series of car bombs on Tuesday was the third major assault on government buildings in Baghdad in four months and a bloody reminder of the fragile security as Iraq heads into a general election in March.

Thousands of Iraqi soldiers and police were deployed in the streets of the capital to protect the auction and army helicopters buzzed overhead. Oil executives travelled in convoys of armoured SUVs with armed guards.
The terrorists tried to send a message to the companies through the bombings ... that Iraq is unstable and investment will be overshadowed by risks, Shahristani told state television on Friday night.

But this message was not delivered and never deceived them. They came and submitted competitive offers that surprised the global oil industry.

FIERCE COMPETITION

Amid fierce competition, a group led by Russian energy giant Lukoil won a deal to develop the West Qurna Phase Two oilfield, which with 12.9 billion barrels of reserves is one of the world's largest untapped supergiant fields. Supergiants have reserves of 5 billion barrels or more.

Lukoil's win was made sweeter by the fact it had lobbied unsuccessfully since the 2003 U.S. invasion to revive a Saddam Hussein-era contract for the field.

The 12.6 billion barrel Majnoon field, another supergiant, went to a partnership of Royal Dutch Shell and Malaysia's Petronas on Friday.

Only two of five fields offered on the first day were initially awarded as firms steered clear of more dangerous or troublesome areas, including the supergiant East Baghdad field partly under Baghdad's Sadr City slum, and northern fields where violence is still rife.

The Qayara field in the north near the violent city of Mosul, which was not awarded on Friday, was won by Angolan state-oil firm Sonangol on Saturday. Sonangol ceded to Iraq's demand that it more than halve its fee to $5 a barrel. The African oil giant also won the nearby Najmah field.

DOOR OPEN ONLY FOR A WHILE
For most other fields, companies undercut what the government was willing to pay. The big fields were awarded at lower fees than deals from the first bid round as energy firms upped their game to avoid returning home empty-handed from a rare opportunity to access cheap Middle East reserves.

They were astonishingly low figures. But 2009 will be remembered as the year that Iraq opened its door to the international oil companies and then shut it. It's 10 fields and that's it, said a senior oil executive.

So it's strategic for the oil firms, either you are here or you aren't and this is the chance.

Lukoil and Statoil agreed the lowest fee in their deal for West Qurna Phase Two. The firms pledged to boost output to 1.8 million bpd for just $1.15 per barrel.

Shell and Petronas won Majnoon with a fee of $1.39 per barrel and a pledge to raise output to 1.8 million bpd, more than double what Iraq expected.

France's Total had negotiated for that field under Saddam Hussein and was among the front runners to win it. Halfaya, with 4.1 billion barrels of reserves, was consolation for Total. CNPC, Total and Petronas won it with a fee of $1.40 per barrel and a plateau production target of 535,000 bpd.

Petronas also won the small Gharaf field with Japan's Japex. Russia's Gazprom won the Badrah field.

Shahristani told companies that missed out not to worry as Iraq had scores of fields, including supergiants, left to offer, he said.

(For a graphic on output targets at the fields, see here)
(Additional reporting by Mohammed Abbas, Ayla Jean Yackley, Aseel Kami, Khalid al-Ansary and Missy Ryanin Baghdad, Raissa Kasolowsky in Manama; Writing by Michael Christie; Editing by Bill Tarrant and Victoria Main)

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