Baghdad: Iraq has opened international bidding for eight large oil and gas fields, paving the way for big investments in a nation with one of the world’s largest petroleum reserves.
If the contracts are approved, they could lead to the biggest foreign stake in Iraq since the industry was nationalized more than 30 years ago.
That could be good news with the price for a barrel of oil breaching $143 for the first time ever on Monday. There are however concerns that a dominant role for Western firms could feed perceptions that U.S.-led forces toppled Saddam Hussein to grab the country’s natural resources.
Those concerns were heightened recently by expectations that Iraq would announce short-term no-bid contracts with five Western oil firms Monday for technical consulting. The New York Times reported about two weeks ago that the firms included Royal Dutch Shell PLC, BP PLC, Exxon Mobil Corp., Chevron and Total.
But oil minister Hussain al-Shahristani told a news conference that the Iraqi government was still negotiating with companies which had expressed keenness to participate in oil field production rather than provide consultancy services for cash.
He said that the short-term contracts were meant as a stopgap measure to boost oil production until the government awards longer-term deals next June.
Some believe they could give Western firms a bidding advantage in that process. , The list would include 35 foreign companies, seven of which are from the U.S., 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. But he made clear that even the longer-term contracts would include cash compensation rather than a share of oil production.
All of the oil fields that the minister talked about are currently producing crude. The new contracts are expected to 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.
The introduction of an additional 1.5 million barrels of oil each day will be enough to move the price for a barrel downward. But some analysts were not convinced, given the deterioration of the Iraq’s infrastructure and potential instability, that it is realistic.
Iraq has been able to boost production to its highest level since the U.S.-led invasion in 2003 because of a reduction in violence. 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. The revenue would help the Iraqi government rebuild 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 at least 25% of the value of the contract to Iraqi companies, said al-Shahristani.
The process of awarding contracts to help develop Iraq’s oil industry has been delayed by the inability to finalize a new a law on how to divide the country’s oil resources. Negotiations over the law have been stalled by political squabbles between the central government and the Kurds.