By Ayla Jean Yackley

ISTANBUL, Aug 2 (Reuters) - The Iraqi Oil Ministry expects
strong demand at an auction for three gas fields it plans to
develop, a senior oil official said on Monday, despite the lack
of a new government nearly five months after an election.

Up to half of the gas from the fields will be for export,
and the companies that win the contracts are expected to build
the export infrastructure, including pipelines, Abdul-Mahdy
al-Ameedi, director general of the Petroleum Contracts and
Licensing Directorate (PCLD), told a news conference.

The priority for natural gas production at Akkas in the
western desert, Siba in the southern oil hub of Basra and
Mansuriyah near the Iranian border is for local use, he said.

Iraq hopes opening its gas sector to foreign investment will
boost generation, which was hit by years of sanctions and war.

The Oil Ministry held a two-day workshop in Istanbul with 11
companies including Total of France, Milan-based Edison and
Norway's Statoil, which are interested in the Oct. 1 auction.

Forty-seven companies pre-qualified.

"I expect the competition among the companies will be so
strong, and we will receive a lot of bids in the bidding
process," Ameedi said.

Mansuriyah, located in the volatile Diyala province, failed
to attract any offers in a tender last year, and Akkas received
just one, which the government said was insufficient. Baghdad
had previously planned to develop Siba itself.

The sites have combined gas in place of 11 trillion cubic
feet, Ameedi said.

EXPORTS

Exporting gas is controversial because of Iraq's inability
to meet demand for electric power. Seven years after the U.S.
invasion, the national grid supplies just a few hours each day.

"The produced gas shall meet local demand requirements, and
whatever is excess will be allocated for exports. The initial
percentage will be up to 50 percent for exportation," Ameedi
said, adding all gas at Mansuriyah will be for domestic use.

"The contractor will be responsible to build the exporting
facilities or pipelines," Ameedi said. "The contractor will
provide the assistance and support in finding customers."

Officials at some firms expressed concerns about the cost of
developing export routes, given that Iraq has no functioning
overseas pipeline links, and the difficulty of finding markets
overseas.

Ameedi said the Oil Ministry would be happy to eventually
contribute fuel to the planned Nabucco pipeline project, which
has yet to secure suppliers. The 7.9 billion euro ($10 billion)
link aims to take 31 billion cubic metres of gas from the Middle
East and Caspian to Europe via Turkey, which borders Iraq.

To sweeten the contracts, the Oil Ministry dropped the
signature bonuses, which were at least $100 million in the two
earlier bidding rounds for oil fields. It will also revise its
maximum remuneration fee, Ameedi said.

"We will reconsider and recalculate this fee because there
is a difference in the investment. I can't say whether it will
be more or less because it is a biddable parameter," said
Ameedi. He also declined to give a minimum plateau production
target.

Edison led a consortium last year that was the sole bidder
for Akkas with a fee more than four-fold the ministry's top fee.

Some potential bidders said there were uncertainties due to
the lack of a new government in Iraq after a general election in
March failed to produce an outright winner.

Asked whether the new government would honour the contracts,
Ameedi said: "You have to ask the new prime minister.

"We believe our job is approved by the Iraqi government.
What we are doing is under the eyes of the government ... If the
current or new government tells us not to sign the contracts or
not to hold the bidding on Oct. 1, then we will not do that."

(Editing by Jane Baird)