BAGHDAD: Iraq opened up eight large oil and gas fields to international firms yesterday, paving the way for major investments by Western companies in one of the world’s largest sources of petroleum.
That could be good news for consuming nations facing record oil prices near $140 per barrel and pushing producers to put more crude on the market. Iraq is one of the few countries in the world with vast oil and gas reserves that have not been fully developed.
But some fear that a major role for Western firms such as Shell, BP, Exxon Mobil and Total could feed allegations that US-led forces toppled Saddam Hussein to grab the country’s natural resources — a claim repeatedly denied by Washington.
During a press conference yesterday, Oil Minister Hussain Al-Shahristani named 35 companies that would qualify to bid on service contracts for eight oil and gas fields. The firms included seven from the US, three from Britain and others from countries like Russia and China.
Al-Shahristani said the companies would be invited to bid on the oil fields of Rumeila, Zubair, Qurna West, Maysan, Kirkuk and Bay Hassan; and the natural gas fields of Akkaz and Mansouriyah.
“These fields were chosen because their production can be raised in a short time and at a low cost,” said Al-Shahristani.
All of the oil fields are currently producing crude, and Al-Shahristani said the new contracts would raise Iraq’s production by 1.5 million barrels per day. Iraq currently produces 2.5 million barrels per day and hopes to raise that to 4.5 million by 2013.
Iraq has been able to boost production to its highest level since the US-led invasion in 2003 because of a reduction in violence.
But Iraq’s oil minister said the country needs help from foreign firms to boost production further because some of its oil fields “suffer from old age and need modern technology to check their deterioration.” Iraq nationalized its oil industry in the 1960s, and participation by foreign firms since then in the development of the country’s natural resources has been extremely limited.
With fuel prices at record levels, foreign firms have been anxious to tap Iraq’s estimated 115 billion barrels of oil reserves and 112 trillion cubic feet of natural gas. Revenue from those resources would help the Iraqi government rebuild the country’s infrastructure and deliver services to its people.
The deadline for the oil and gas bids announced Monday is the end of March, and preliminary contracts will be signed next June. Every company involved in the bidding process must have an Iraqi partner and must give 25 percent of the value of the contract to Iraqi companies, said Al-Shahristani.
Debate over Western participation in Iraq’s oil industry reignited about two weeks ago when The New York Times reported that Royal Dutch Shell PLC, BP PLC, ExxonMobil Corp., Chevron and Total were close to signing short-term oil service contracts with Iraq on a no-bid basis.
The deals were reportedly designed as an interim way to boost Iraq’s oil output until the country could agree on a new a law on how to divide the country’s oil resources, which has been stalled by political squabbles between the central government and the Kurds.
The Kurdish regional administration in northern Iraq has signed over 20 oil deals with foreign firms to work in Kurdish-controlled fields since it drafted its own oil and gas law in August 2007.
But the Iraqi central government considers the deals illegal because the country has not yet completed a new national oil law.
Several Democratic senators in the US recently asked the Bush administration to block the Iraqi government’s reported no-bid deals with Western firms until the country finalized the oil law, but the White House refused.
Iraqi government spokesman Ali Al-Dabbagh said yesterday the country had never considered a no-bid process, saying “there was never any intention to award the contracts without a tender.”
He also denied American influence on the Iraqi government’s oil decisions, saying “politics does not come into this.”
“There is no preferential treatment for anyone, no matter who,” said Al-Dabbagh.
Yesterday, the Times also reported that a small US State Department team helped draw up contracts between the Iraqi Oil Ministry and the five major oil companies reportedly getting no-bid contracts.
State Department spokesman Tom Casey confirmed a small number of US advisers were providing “technical support” to the Iraqi Oil Ministry. But he said “they are not there to try and give the Iraqis any kind of specific requests or to make decisions or to even push in an individual direction.”
Casey said the apparent decision by the Iraqis not to announce no-bid contracts for several Western firms yesterday was their own and not influenced by Washington.
