Shares in Petrel Resources shed half their value yesterday after it emerged that the firm had lost out on two oil contracts in Iraq.
Petrel has been focusing on expansion in Iraq for the past year, and has spent some £1 million sterling on applications for three contracts.
Petrel chairman Dr John Teeling said last night that he had not received any official confirmation from Iraq's oil ministry on the matter.
He accepted, however, that the firm had failed to win the two contracts, which have been awarded instead to companies from Turkey and Canada.
The deals are the first oil contracts to be awarded to foreign firms since Saddam Hussein fell from power more than a year ago.
A third contract is to be awarded within the next month, for the development of a larger field called Suba-Luhais.
Petrel shares halved in London yesterday, closing 52.5 per cent lower at 44.5p sterling.
Dr Teeling said he was surprised that Petrel had not beaten off its competitors for the Khurmala and Himrin contracts that were awarded yesterday. He said Petrel, which has been working in Iraq for the past seven years, had the strongest technical offering.
The firm's political neutrality should also have helped, he said.
"We thought we were going to get this. Unfortunately you must take the setbacks," Dr Teeling added.
Iraq's oil ministry awarded the oilfield development contracts to Turkish and Canadian firms.
Turkey's Everasia won the contract to develop the Khurmala Dome field in the north. A Canadian firm named IOG will develop the Himrin field.
The projects aim to realise Khurmala's potential to produce 100,000 barrels per day (bpd) and raise output at the Himrin field.
The ministry is still studying offers for another contract to raise the output of the Suba-Luhais field from 50,000 to 180,000 bpd.
Unlike production-sharing contracts Iraq could negotiate with oil majors after elections due in January, the contracts do not involve contractors after construction or as operators.
The cost of the three projects combined has been estimated at $500 million. Their small size and scope has failed to attract the interest of major oil firms. - (Additional reporting: Reuters)
