WORLD NEWS: “Iraq Opens Door to Foreign Oil Bids, Circumventing Delayed Legislation,” by Guy Chazan, Wall Street Journal, 14 October 2008.

No surprise, as the ROI (rest of Iraq—south of Kurdistan) follows the KRG’s (Kurdish Regional Government) example of letting oil company contracts without waiting on the passage of the much-fabled central gov law.

Interesting set-up: foreign companies get 49% stake compared to local NOC’s 51%, and would recover their costs and earn additional revenue from oil produced above the current levels at the fields. This is not the preferred method for most majors, that typically don’t like service contracts and prefer deals that grant equity in the ground—so to speak (so called “booked reserves”), but it reflects the industry’s evolution as NOCs dominate more and more. Good news: foreign firms can take their profit in either oil or money (cash).

Why do the foreign firms jump? Access to low-cost reserves (meaning cheap to extract) is simply too good to pass up.