IRAQ:IRAQ YESTERDAY announced the first round of tenders opening its oilfields to foreign firms and providing for large-scale investment by multinationals ousted in 1972 when the company's energy sector was nationalised.
Oil minister Hussein Shahristani said: "We feel it is very important for Iraq to arrest any decline and increase production."
Baghdad is offering short-term consultancy and procurement contracts valued at $500 million (€317 million) with the aim of boosting overall production by 1.5 million barrels a day at Iraq's largest fields. "These fields were chosen because their production can be raised in a short time," he asserted. Iraq is currently producing 2.5 million barrels a day with poorly maintained and obsolete equipment, from fields depleted by neglect and over-pumping during decades of war and sanctions. Iraq is eager to increase current exports of 2.1 million barrels a day to 4.5 million barrels a day over the next five years.
The move is highly controversial because five of the no-bid deals under discussion are with Shell, British Petroleum, Exxon Mobil, Total and Chevron, the first four being concessionaires during the deeply resented reign of the defunct Iraq Petroleum Company.
Attempting to alleviate concern that the multinationals would be returning to exploit the country's oil wealth at the expense of Iraqis, Dr Shahristani said: "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."
Iraqi commentators are sharply critical of the fact that US State Department officials advised the ministry on the short-term contracts which give multinationals an advantage in the race for long-term deals.
Issam Chelabi, a former oil minister, pointed out that the "no-bid process itself . . . is a kind of favouritism". He was also critical of choosing Western multinationals rather than smaller companies which specialise in boosting production at declining fields.
Some Iraqi politicians and Democratic US senators have called for the postponement of tendering and signing contracts until the national oil and gas law is adopted.
But this law has divided legislators into two camps. The first wants the central government to be in control of oil policy and revenues, the second insists that control should rest with the regions. Most Iraqis favour the first option, but the Kurds and the influential Shia Supreme Iraqi Islamic Council demand that the regions be in charge.
The legal framework and conditions of pending short-term contracts will be presented to the companies in September. Forty-one firms have been approved to bid on long-term contracts for the development of both oil and gas fields. These include companies from Russia, Japan, and China, as well as Western multinationals.
