Iraq opens bidding for oil, gas fields

Foreign contracts aim to boost production near prewar level

July 01, 2008|By Doug Smith and Said Rifai | Doug Smith and Said Rifai,LOS ANGELES TIMES

BAGHDAD - Iraq's oil minister announced yesterday the start of bidding by foreign companies for contracts to boost the production of eight underperforming oil and gas fields.

The contracts, to be executed in about 18 months, would open Iraq's oil fields to foreign companies for the first time since Saddam Hussein nationalized foreign concessions in the 1970s.

Oil Minister Hussein Shahristani said 35 companies had been selected to bid. Among them were seven from the United States - including Chevron, Exxon Mobil, Occidental Petroleum and Conoco Phillips - and four each from China and Japan.

The bidding will proceed even though Iraqi lawmakers have not yet ratified a national oil law to regulate foreign contracts. The measure has been stalled by disagreements over how to divide oil revenues among Iraq's regions.

Shahristani said there had already been too long a delay in upgrading depleted fields, which require new technology and foreign expertise to tap hard-to-reach reserves.

Iraq has been unable to invest sufficiently in its oil operations over the past two decades because of international sanctions and war. Insurgents have frequently attacked oil sites since the U.S.-led invasion in 2003.

The work put up for bid yesterday would increase production by 1.5 million barrels per day by 2013, approaching the prewar level of 4.5 million barrels a day, Shahristani said.

During a sometimes testy news conference, Shahristani renewed his criticism of the Kurdish Regional Government for signing deals with foreign companies that offer them a share of the oil they extract. In contrast, he said, the national government was only offering contracts to service existing fields. Development of new resources would come later.

To further protect Iraqi interests, Shahristani said, companies bidding for the contracts would be required to set up offices in Baghdad. Those winning the bids would be required to open branches in Baghdad and to establish partnerships providing Iraqi companies at least a 25 percent ownership share, he said.

"We do not see the necessity to have anyone sharing the Iraqi people's oil," Shahristani said, criticizing the Kurdish deals. "The Iraqi oil will remain under complete Iraqi control under the auspices of the National Oil Company once it is established."

The Oil Ministry itself has faced criticism over its efforts to retain four major oil companies as consultants. The no-bid contracts, which some news media reports said were to be announced yesterday, were viewed as offering a foot in the door for those companies, which would then be in a good position to win contracts for larger projects.

Last week, three U.S. senators had urged the Bush administration to try to stop the deals, which they said could lend credence to the perception that the United States went to war in Iraq over oil and could inflame sectarian tensions.

"Iraq does not need their advice," Shahristani said of the senators. "If they really had the interests of Iraq in mind then they would have said something about the profit-sharing agreements that have been signed" in Kurdistan.

Nonetheless, he said the no-bid contracts had not been signed and indicated that he was not sure they would be. Their purpose was to raise production by 500,000 barrels per day in the short term, but Iraqi engineers had been able to do that without help, he said.

Doug Smith and Said Rifai write for the Los Angeles Times.

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