Up for Bid

by Steve on June 30, 2009

Iraq is getting back in the oil and gas contract business after having been distracted for the last few years.  The oil ministry recently held a televised auction for 20-year contracts on some of their fields.

The bidders will not be paid for anything up to the minimum production level – but they say how much they want to be paid for each barrel produced above the minimum, and also predict how much oil they will be able to produce.

From that, the auctioneers pick a winning bidder.

However, there is another twist. In a red envelope, the auctioneers have the maximum amount that the oil ministry is prepared to pay.

So far, those amounts have been significantly less than the oil companies are asking for, so the winning bidders have been asked to cut their prices.

Sounds like a crazy game to me: if you win you lose.

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