Iraq MPs promise tough ride on oil contracts

TOUGH RIDE: MPs have said parliament must have the right to scrutinise any long-term oil contracts signed with foreign companies. (Getty Images)

The Iraqi parliament's oil and gas committee must have the right to scrutinise any long-term oil contracts signed with foreign firms or it will try to block the deals, the committee's head said on Tuesday.

The comments by Ali Hussain Balou came a day after the Oil Ministry opened Iraq's giant oilfields to bids for long-term contracts by foreigners for the first time in decades.

Balou also demanded an explanation from Oil Minister Hussain Al-Shahristani on plans to offer a series of short-term technical support contracts worth $500 million each to a handful of Western oil majors without competitive bidding.

"The parliamentary oil and gas committee... should have access to every detail on all the contracts, otherwise we will block them in parliament," Balou, a Kurd, told newswire Reuters.

The deputy head of the committee, Abdul-Hadi Al-Hasani, a Shi'ite, added that parliament should have the right to approve contracts that were either long-term or for major fields.

The comments suggest the government might face stiff opposition in parliament to allow international firms to help raise output at six of its key producing oilfields.

The move should mark the return of the oil majors, whose cash and expertise Iraq needs to restore its oil infrastructure that has been hard hit by sanctions and war.

Iraq's proven reserves, at 115 billion barrels, are the world's largest after Saudi Arabia and Iran.

At a news conference on Monday to announce which fields were open for bids, Al-Shahristani insisted the cabinet was not obliged to submit oil contracts to parliament for approval.

"There is no procedure in the country on any contracts that must go to parliament," he said.

"But members of parliament will have full right to examine all the procedures and take part in negotiations if they wish."

Despite Iraq's need to raise output and rehabilitate its ageing oil infrastructure, suspicion remains over foreign involvement in the sector.

Critics of the US-led invasion in 2003 argue it was designed to give Western oil firms control over Iraqi oilfields. US and British officials deny the charges.

"If we find these contracts are not serving Iraq's interest, we will take a position against them," Balou said.

Balou and Al-Hasani criticised Al-Shahristani for negotiating the short-term technical support contracts, which might give the majors involved a headstart in bidding for the long-term deals.

Royal Dutch Shell; Shell in partnership with BHP Billiton; BP; Exxon Mobil and Chevron in partnership with Total are the key Western firms negotiating for the no bid contracts, which are designed to quickly raise output.

"We will have words with Shahristani to understand why he wants to sign such deals or even consider them," Balou said.

Iraq has prequalified 41 firms for the long-term deals, but Balou said he was suspicious the Western majors had already been secretly pre-selected, so any bidding would be "a show".

Al-Hasani added: "We want to know why these companies exactly were chosen... we wonder why they were shrouded in secrecy."

On Monday, Al-Shahristani said no company would get any "privilege" in bidding for the long-term deals.

Iraq's cabinet agreed a new draft national oil law in February last year, but it has failed to get through parliament partly because of disputes with the Kurdish Regional Government (KRG) over control of reserves and contracts.

Balou questioned whether it was wise to move ahead with oil contracts in the absence of the law. The government says it can do so, utilising an old law.

Al-Shahristani said he hoped the long-term deals could be signed in June 2009 to raise output by a combined 1.5 million bpd at those six fields. He said Iraq aimed to raise output to 4.5 million bpd by 2013 from the current 2.5 million bpd. (Reuters)

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