Iraq set to announce foreign oil contract winners

OIL CONTRACTS: Iraq government assures foreign oil giants that investment plans will not be scuppered. (Getty Images)

Iraq said Wednesday it would announce late June which energy companies have been awarded contracts to work in the country, and assured foreign oil giants their investment plans would not be scuppered.

Iraq has the world's third-largest known oil reserves but desperately needs billions of dollars to revitalise the nation's crumbling pipeline and refinery infrastructure, boost existing production levels and develop untapped fields.

New hydrocarbons legislation, however, seen as pivotal in determining how foreign energy companies will operate in Iraq, has been held up by Iraqi MPs since a draft law was submitted to parliament in February last year.

Oil Minister Hussein al-Shahristani said successful bidders for service agreements, in which Baghdad pays a set fee to increase production and develop chosen sites, would be named at the end of June.

"Of 120 candidate companies, we pre-selected 35 to work and invest in six major oil fields and two gas fields," he said.

"On June 29 and 30, we invite the press to witness the opening of the envelopes."

The contracts to be awarded this month differ from production sharing agreements - which have been used in Iraq's autonomous Kurdish region -  where profits are shared between oil companies and the government.

The shortlist was first announced in June 2008 and includes global energy giants Exxon Mobil, Royal Dutch Shell, Chevron and Sinopec, as well as large Iraqi state-owned operators. The oil ministry has since repeatedly delayed announcing the bid winners.

Shahristani has come under fire from MPs who charge that such delays have resulted in 10 billion dollars in lost revenues for a federal budget that is projected to go into deficit.

He has also been accused of taking an ultra-nationalist approach, insisting that oil wealth - meaning profits - cannot be shared with foreign companies.

But Sharistani moved to assure international oil giants that the stalled hydrocarbons law would not hamper investment from abroad.

"If it is going to be delayed for any reason, then the existing laws allow the oil ministry to approve these contracts," he said, while insisting that the oil would remain under Iraqi control.

"The companies selected will have to pay tax on their revenues," he said.

Prime Minister Nuri al-Maliki, meanwhile, held talks with Christophe de Margerie, the chief executive of French energy giant Total, also shortlisted, and invited him to attend the contracts announcement at the end of the month.

Iraq hopes to pump six million barrels per day within the next four to five years, up from its current stated output of around 2.2 million bpd, as new projects come online.

Although Iraq's reserves trail only those of Saudi Arabia and Iran, development of the conflict-ravaged country's fields has been very slow.

The oil contracts to be awarded at the end of June are spread across the country, with three in the southern province of Basra, two in Kirkuk in the north, and one in Maysan, also in the south.

The two gas contracts are for sites in Anbar province, west of the capital Baghdad, and Diyala, northeast of the capital.

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