Iraq fails to sign deals with oil majors

NO DEAL: Iraq has failed to sign agreements with global oil majors, which were aimed at helping boost the war-torn country's oil production. (AFP)

Iraq said on Monday that it had failed to sign technical support deals with global oil majors hoping to cash in on boosting the war-torn country's extensive but underexploited oilfields.

Iraq is still negotiating with Shell, BP, ExxonMobil, Chevron and Total, and a consortium of other smaller oil companies, to develop six oil blocks and two gas fields, Oil Minister Hussein al-Shahristani told a press briefing.

"We did not finalise any agreement with them because they refused to offer consultancy based on fees as they wanted a share of the oil," he said.

"The TSAs [technical support agreements] are only simple consultancy contracts to help us raise the production during the interim period" before the ministry enters into long-term contracts to develop the oil and gas fields.

The widely expected arrangement was to pave the way for global energy giants to return to Iraq 36 years after Saddam Hussein threw them out, and was seen as a first step to access the earth's third largest proven crude reserves.

The head of British-Dutch oil company Shell nevertheless said he hoped to sign a deal with Baghdad in the next few weeks.

"I hope it [a deal] is within weeks and not months," chief executive Jeroen van der Veer told reporters on the sidelines of the World Petroleum Congress, one of industry's biggest events.

The head of Spanish oil group Repsol YPF, Antonio Brufau, added that "many things have to be clarified before signing in Iraq".

Last week, oil ministry spokesman Asim Jihad told newswire AFP that it would sign the support contracts on Monday and award longer-term deals to 41 other energy companies.

"We chose 35 companies of international standard, according to their finances, environment and experience, and we granted them permission to extract oil," Jihad said.

Six other state-owned oil firms from Algeria, Angola, Pakistan, Thailand, Turkey and Vietnam have also been selected to compete for extraction deals.

Iraq wants to ramp up output by 500,000 barrels per day from the current average production of 2.5 million bpd, about equal to the amount being pumped before the US-led invasion in March 2003.

However, political infighting over how oil revenues should be shared has slowed the process.

Crucially, the passing of the hydrocarbon law that aims to govern profit-sharing as well as foreign agreements has yet to be passed by the nation's parliament.

Exports of 2.11 million bpd currently form the bulk of the war-torn nation's revenues, and the oil ministry is keen to raise capacity over the next five years to 4.5 million bpd.

Iraq has crude reserves estimated at 115 billion barrels but it is sorely lacking in high-tech infrastructure following years of crippling UN sanctions after the 1990 invasion of Kuwait by Saddam Hussein.

Shahristani stressed that Iraq needed the services of experienced companies to realise the potential of its huge crude reserves but added that it was not ready to do so at any price.

"It is not possible for Iraq which has large oil reserves to stay at the current level of production. Iraq should be the second or the third source of oil exportation," he said.

"We went to these global companies and asked them to offer us consultancy but they will have no privileges or will not get a share of oil."

Shahristani said his ministry had invited tenders from the 41 selected foreign firms to enter into long-term services agreements for which the contracts would be signed next year.

The companies have been told to present their offers by April 2009, he said, adding the deals would be signed later in June.

"It is a service contract and not a production-sharing contract," he added.

Shahristani said Iraq would not enter into production-sharing contracts with any energy major, while service arrangements for overseas firms would require locals partners.

"We think there is no need to share Iraq's oil with anybody," the minister said, adding the final offers of the companies would have to be approved by the cabinet.

Those companies that offered higher revenues for the ministry would be preferred in awarding the services contracts, Shahristani said.

Print | Email | Discuss this article

| Share |

READERS' COMMENTS

Click here to post a comment

Add your Comment All posts are sent to the administrator for review and are published only after approval. ArabianBusiness.com reserves the right to remove any comment at any time for any reason. Please keep your responses appropriate and on topic.
Name *
Remember me on this computer
Email *	(Your email address will not be published)
City
Country
Subject *
Comment *
Notify me of further comments
Enter the words above *
Please click post only once - your comment will not be published immediately.

MORE FROM ARABIANBUSINESS.COM