FACTBOX-Changes

Iraq has proposed to sweeten the terms of the service contract it is offering to international oil firms to boost output at its biggest producing oilfields.
The following lists some of the changes in the 20-year contracts proposed during a three-day workshop Iraqi officials hosted for oil firms in Istanbul that ended on Saturday.
BIDDING
There will be three items for oil firms to bid:
- A short-term improved production target at the oilfield to be reached 18 months after the contract takes effect.

- A long-term enhanced production target at the field to be reached six years after the contract takes effect. The enhanced target must be maintained for a minimum of seven years.
- The cost per barrel of reaching the enhanced production.
Initially, the bidding parameters were:
- A maintenance fee in cost per barrel for maintaining oilfield production at current levels.
- A fee in cost per barrel for increasing output to a set level.
- A fee in cost per barrel for reaching an enhanced output target within seven years and maintaining it.
DECLINE
- Iraq will write into the contract a five percent decline rate in production rates from the oilfields, which will kick in after the improved production target is reached.
- There was no decline rate in the initial baseline contract, a cause of concern for oil firms as some of the fields were old and were expected to go into decline over the course of the contracts.
- This was one of the most important changes for oil companies as they will receive payment only from output above the baseline rate. If they fail to pump above the baseline, in theory they will not get paid. Lowering the baseline should ensure there is enough output to pay.