Iraq clears way for foreign investment in oil sector

OPENING SECTOR: Iraq's government has unveiled six oilfield areas to be opened to international investment. (Getty Images)

Iraq's Oil Ministry unveiled on Monday six oilfield areas open to foreign firms for long-term development contracts, clearing the way for major international involvement in the country's petroleum wealth.

The fields are Rumaila, Kirkuk, Zubair, West Qurna Phase 1, Bai Hassan and the Maysan fields. Maysan comprises three fields, Bazargan, Abu Gharab and Fakka.

Oil Minister Hussain Al-Shahristani announced the list at a news conference in Baghdad. The government has already pre-qualified 41 foreign firms to bid for the contracts.

Two gas fields, Akkas and Mansuriyah, were also opened.

The Oil Ministry said last week it had finished negotiations with oil majors on six separate short-term oil service contracts and hoped to sign those deals during the next month.

The short-term deals, each worth about $500 million, are aimed at quickly lifting output at Iraq's largest producing fields by a combined 500,000 barrels a day (bpd). Iraq's current oil production is around 2.5 million bpd.

Taken together, the short-term and long-term contracts will open the door to major international involvement in the OPEC member's oil sector for the first time in decades.

The majors have been positioning themselves for years in the hope of eventually gaining access to Iraq's proven reserves, which at 115 billion barrels are the world's largest after Saudi Arabia and Iran. Deputy Prime Minister Barham Salih said in April that reserves could be as much as 350 billion barrels.

Five of the short-term deals that have been under discussion are with Royal Dutch Shell, Shell in partnership with BHP Billiton, BP, Exxon Mobil and Chevron in partnership with Total.

Iraq has also been in talks with a consortium of Anadarko, Vitol and Dome for a sixth short-term contract.

Those talks on the short-term deals have given the majors a head start in efforts to bid for future oil contracts. The US companies were involved in Iraq long before Saddam Hussein took over the country and nationalised the oil industry.

After bids are submitted for the long-term contracts, negotiations may take months. At the end of 2008 or in early 2009, the Oil Ministry has said it would announce the winners.

Oil is Iraq's main source of income, and boosting output is key to earning the cash the country needs for reconstruction.

Iraq's cabinet agreed a draft oil law in February last year, but it has failed to get through parliament partly because of rows between the Kurdistan Regional Government (KRG) and Baghdad over who will control oil reserves and contracts.

In the absence of the law, Baghdad has moved ahead with the short and long-term contracts, saying this is in line with an old oil law in existance before the US-led invasion in 2003. (Reuters)

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