Initial Tender Protocol

2. Objective of the Offering

The objective of the current offering is the award of contracts to qualified companies or consortia of companies to carry out exploration, appraisal, development and production activities in accordance with the terms of the contracts applicable to each of the 30 Contract Areas.

Winning companies or consortia must enter into either an Exploration, Development and Production Contract (“EDPC”) or a Development and Production Contract (“DPC”), either a “Contract”, depending on the Contract Area, in order to carry out such activities.  The principal terms of the Contracts are as follows:

• All oil and gas in-place and produced belongs to the people of Iraq.
• The Contractor funds all exploration, appraisal, development and production activities.
• The Contractor is entitled to recover Petroleum Costs and to receive Remuneration from any resulting developments.
• For certain costs categorized as Supplementary Costs, the Contractor is entitled to recover such costs at an accelerated rate and with interest.
• Petroleum Costs, Supplementary Costs and Remuneration will be paid in export oil unless Iraq elects to pay in cash. Any cash election shall be made in advance of the calendar year for which cash payments have been elected and such cash election shall apply for the entire year.
• The terms of the Contracts vary according to the level of exploration maturity.
  • The EDPC provides for an Exploration Period from 5 to 9 years and a Development Periods of 25 years.
  • The DPC has a Development Period of 20 years with the potential for a single 5 year extension.
• Bonus payments are required in the Contracts.
  • The EDPC will require a signature bonus and a further bonus upon the Declaration of Commerciality.
  • The DPC will require a signature bonus and a further bonus following the achievement of the First Commercial Production Date.
  • Bonus payments are not cost recoverable or tax deductible.
• Petroleum Costs, Supplementary Costs and Remuneration Fees are payable once a sustained level of production has been achieved, which is referred to as the ‘First Commercial Production Date’.
• Royalty of 15% is payable from Deemed Revenues.
• Petroleum Costs are payable from the Net Deemed Revenue (Deemed Revenue less Royalty)
• Supplementary Costs are payable from Net Deemed Revenue less Petroleum Costs and Remuneration.
• Remuneration is payable as a (bid) percentage of the Remaining Net Deemed Revenue (Deemed Revenue less Royalty less Petroleum Costs paid).
• Contractor profits (Remuneration) will be subject to Corporate Income Tax in Iraq.
• Minimum Work and Expenditure Obligations will vary by Contract Area depending upon the expected minimum requirements for the Contract Area.
• Contractors will have obligations with respect to the provision of training and technology transfer as well as employment of local personnel and the procurement of local goods and services.
• Contractors will contribute to an Infrastructure Fund and these contributions will be considered as Petroleum Costs.
• The Contracts will be in both the Arabic and English languages, in the event of a conflict, the English language version shall prevail.
• Provisions for resolution of disputes between the parties to the Contracts include potential recourse to independent expert as well as to international arbitration (International Chamber of Commerce rules, seat in Paris or mutually agreed alternate venue, English language).
• Activities in the Contract Areas will be subject to Iraqi law and the applicable regulations of the Ministry of Oil, and must comply with the “best practices” of the international petroleum industry, particularly with regard to health and safety of human resources, public safety, and preservation of the environment and general business ethics.

3. Documentation for Participating in the Offering

In order to participate in the bidding, a company must have been previously individually qualified by the PCLD of the Iraqi Ministry of Oil.  In addition, all participating companies must:

• Submit a Power of Attorney nominating and empowering one or more Authorized Representative(s) of the company in front of the PCLD;
• Submit a Confidentiality Agreement signed by an Authorized Representative of the company; and
• Pay the Participation Fee(s).

The Power of Attorney and Confidentiality Agreement must be notarized by a duly credentialed Notary Public, but do not require Consular notarization.  The Participation Fee notice does not require notarization. 

One original of all documents should be submitted, with a PDF copy emailed to dg_pcld@oil.gov.iq and adelnn2g@gmail.com.  The documents should be submitted to the PCLD in Baghdad at the address provided in Section 6.1.

Once a company has been pre-qualified and provided the documents (and paid the Participation Fee(s)) described above, it will be permitted to bid in accordance with the provisions of Section 4.

No documentation submitted to the PCLD will be returned with the exception of any documents necessary for the cancellation of bid bonds subsequent to the terms outlined in Section 4.

3.1 Authorized Representative

Each company participating in this process must nominate one or more individuals as Authorized Representatives for the company before the PCLD with respect to any and all correspondence related to the offerings. 

An Authorized Representative(s) must be nominated by a notarized Power of Attorney in the form of Annex II, duly signed by an authorized signatory of the company. It is recommended that the Authorized Representative(s) nominated be an executive who will be available throughout the process to ensure that the information requests and other communications are properly and efficiently handled within the company.  The Contract(s) do not necessarily have to be executed by the Authorized Representative(s) as a fresh Power of Attorney can be executed at the time, as necessary.  Similarly, a company may add or substitute an Authorized Representative at any time simply by submitting a new Power of Attorney.

Along with the Power of Attorney, the office address, email address, office phone and cell phone numbers of each Authorized Representative should be provided.  These do not require notarization.

3.2 Confidentiality Agreement

In order to gain access to the data packages described in Section 3.5, companies must have executed and delivered to the PCLD a notarized Confidentiality Agreement in the form of Annex III and paid the Participation Fee(s) described in Section 3.3. 

3.3 Participation Fees

Separate data packages have been prepared for the Fifth (+) Round Offering and the Sixth Round Offering.  In order to receive (or view) a data package for the Fifth (+) Round Offering or the Sixth Round Offering and to submit a bid in respect of Contracts, a company must pay the Participation Fee for such offering.  Each company in a consortium must pay the Participation Fee. The Participation Fee for the Fifth (+) Round Offering is US$100,000 and for the Sixth Round Offering is US$100,000.  A company may obtain the data packages and participate in both rounds by paying a Participation Fee of $150,000.

It should be noted that this Participation Fee is not a “purchase” of the data package, but a fee which allows participation throughout the process (including access to the underlying technical data, draft contracts, etc., and participation in any workshop/webinar that may be organized).  

3.4 Data Packages

Companies who have paid Participation Fees in respect of Fifth (+) Round Offering or the Sixth Round Offering, and submitted the duly notarized Power of Attorney and signed the Confidentiality Agreement, may receive the data package(s).  This is in an electronic format though in most cases these data are in image (i.e., non-editable) formats.  Although every effort to include all relevant data that existed either within the Ministry of Oil or in the operating companies, the Ministry of Oil offers no assurances on  the contents or completeness of the data available for any Contract Area.

Part of the information provided in the data package is provided in English; however some data (e.g., well files) will only be available in Arabic.  Data packages will be provided on a password protected disk drive.    

The data packages may, at a company’s election and risk, be sent by courier, or retrieved by an Authorized Representative(s), or their designee(s). 

• The name of person to whom the data package should be sent;
• Street address (and, where appropriate, suite number) for delivery (note: P.O. Box numbers are not accepted by courier companies); and
• Telephone number of recipient.

The PCLD can accept no risk for loss or delay in customs or any fees that customs or other authorities may levy, if the company requests shipment by courier.

Companies will be advised when appropriate document and payment confirmation has been received and the data package is ready to be collected, or the tracking number of the courier package.  This advice notice should be presented if the data package is collected in person. 

3.5 Consortia

While companies may bid singly, the Ministry of Oil encourages the development of consortia between prequalified companies.

In order to participate in the Fifth (+) Round Offering or/and the Sixth Round Offering, companies must have been prequalified individually.  Prequalified companies will be free to form bidding consortia up to the deadline for submission of bids for any Contract Area that will be described in the Final Tender Protocol.  The only restrictions that will apply are:

• The Operator must have a minimum 30% interest in the Contractor’s consortium (i.e. not taking into account the participation of the ROC.);
• The minimum interest that may be held by a member of a Contractor’s consortium is 10% (again, not taking into account the participation of the ROC);
• No company, or any of its affiliates or otherwise related companies, will be permitted to make more than one offer for a Contract Area, whether individually or in consortia; and
• In the event a company wishes to withdraw from a consortium following submission of a successful bid but before signing the contract, the remaining consortium member(s) must assume the obligation of the withdrawing company. In no circumstances will new companies be permitted into the consortium during this period.

3.6 Non-Disclosure Undertaking on the Part of the PCLD

Documents submitted by the companies will be considered permanently to be of a confidential nature and will not be disclosed except where authorized in writing by the relevant Authorized Representative, or where required under Iraqi law.  Notwithstanding, all bids submitted by participating companies, as well as the constitution of any bidding consortia, will be publicly disclosed at the time of bidding.

3.7 Disqualification

The prequalification of prospective bidders may be cancelled in the following circumstances:

• Declaration of bankruptcy, dissolution, or sale of the company;
• At the request of the company;
• Misrepresentation by the company;
• Failure to comply with the conditions of this bidding process; or
• Any illegal act proved in a court of law.

4. Bidding Stage

The deadline and place of delivery of the bids will be advised in the Final Tender Protocol, which will be issued coincident with the definitive version of the EDPC and DPC.

4.1 Bid Bond

In order to guarantee the winning bidder’s obligation to sign the Contract, each bidder must present to the PCLD a bid bond supporting its bid for the Contract Area. If a bidder is bidding for more than 1 Contract Area, a separate bid bond must be provided for each bid. Such bid bond(s) must be presented before the date for the submission of bids.  A bid bond will be in the amount of five million United States Dollars (US$5,000,000).  The form of bid bond will be published in the Final Tender Protocol. Bid bonds presented by companies or consortia that are not the winning bid will be returned after the bidding process.

4.2 Bidding Process

The detailed form of the bidding process will be advised in the Final Tender Protocol.  However, in general terms, it is expected to consist of the following elements:

• Bids for Contract Areas can be presented by a company bidding alone or by a consortium;
• The PCLD will review the completion of the bid envelope forms and, at its sole discretion, ask for any required corrections;
• The bid envelopes will be opened immediately following the deadline for their submission;
• The bids must conform directly to the instructions to be contained in the Final Tender Protocol.

4.3 Bidding Parameters and Evaluation of Bids

The sole bidding parameter will be the Remuneration Percentage Bid.  The Remuneration Percentage Bid (RPB) can be expressed to two decimal points (i.e. xx.xx%). 

The Ministry of Oil will accept the bid with the lowest Remuneration Percentage Bid  for the Contract Area provided that its RPB does not exceed a Maximum Remuneration Percentage Bid (“MRPB”) pre-defined by the Ministry of Oil. The MRPB for Contract Areas will not be advised to bidders in advance.

5. Signature Of The Contract

The winning companies or consortia will execute a Contract with an Iraqi State company within the timeframe that will be established in the Final Tender Protocol.

Companies will be able to delegate the signing of the EDPC or DPC, as the case may be, to a wholly-owned and controlled affiliate of the qualified company.  A Performance Guarantee will be required from an affiliate where the signatory (including the qualified company, if it is to sign) has less than 250,000 barrels of oil equivalent per day of production.  If no such affiliate exists, the contract must either be executed by, or the Performance Guarantee be provided by, the ultimate parent of the qualified company. 

On or before the signing of the contract, the winning bidder will need to provide the following documents:

• In the event the qualified company opts to sign the contract through a wholly-owned and controlled affiliate, the constituent articles and amendments of the signatory company; and a legal opinion acceptable to the PCLD containing the information concerning the relationship between the qualified company and the company that will sign the contract;
• A Performance Guarantee as appropriate;
• Duly authenticated documents proving the qualification of the legal representative who will sign the contract on behalf of the company; and

In the event these documents are not delivered in a timely manner, the contract will not be signed with the winning companies and the bid bond will be drawn.

In case the winner is a consortium and one of its companies does not present the necessary documentation, the other companies within the consortium must assume the responsibilities of the non-conforming company.  However, under no circumstance will any further pre-qualified companies be allowed to enter into the winning consortium before the signing of the contract.

6. Explanation of Information

6.1 Contact Details

The PCLD is available to provide clarification or additional information regarding the process, the contract terms, or the Contract Areas to be bid.  Questions may be communicated to the PCLD by e-mail to dg_pcld@oil.gov.iq; adelnn2g@gmail.com with copies to bill.cline@gaffneycline.com and mhussein@gaffneycline.com.   No questions other than those of a general process nature will be answered other than to companies that have paid the Participation Fee(s).  All information requests will be handled on a first-come, first-served basis by the PCLD.

As described in Section 3, originals of Annexes I, II and III should be sent by courier to:

Petroleum Contracts and Licensing Directorate
Ministry of Oil
Port Said Street
Baghdad, Iraq
Attention: Mr. Adel Allawi, Deputy Director General

7. PCLD’S Rights and Assurances

The PCLD oversees all phases of the licensing process on behalf of the Ministry of Oil. The PCLD may revoke, in full or in part, at any time, the current offering.  The PCLD can take such steps that it considers necessary to clarify or complement the offering process.

The PCLD reserves the right to unilaterally revise the timetable and related terms and procedures, as well as to disqualify any previously qualified company.