July 1, 2008 in Nation/World

Iraq opens bidding for its oil, gas fields

Sebastian Abbot Associated Press
Associated Press photo

Iraq’s Oil Minister, Hussain al-Shahristani, talks to the media in Baghdad on Monday. The Iraqi government announced it is opening oil and gas fields for bids from international firms. Associated Press
(Full-size photo)

Bush signs war-funding bill

» WASHINGTON – President Bush on Monday signed an emergency spending measure that funds military operations in Iraq and Afghanistan into next year, along with an expansion of veterans benefits and an extension of jobless aid.

» The measure, enacted as the troubled economy has become a top campaign issue, provides as many as 13 extra weeks of unemployment assistance for people who have lost their jobs and have exhausted their typical 26 weeks of state benefits.

» The measure will fund military operations into mid-2009, after the next president takes office, and it will save lawmakers from casting what, for some, could be a politically troublesome vote on war funding as Election Day approaches.

» It includes a new requirement – sought by lawmakers from both parties – that the Iraqi government match U.S. spending for reconstruction in Iraq dollar-for-dollar.

Los Angeles Times

BAGHDAD – Iraq opened international bidding for eight enormous oil and gas fields Monday, paving the way for investment in a nation with some of the world’s largest petroleum reserves.

If approved, contracts to update and manage those fields could involve the biggest foreign stake in Iraq since its oil industry was nationalized more than 30 years ago and help Iraq reach its goal of nearly doubling petroleum production by 2013.

That could be good news with the price for a barrel of oil breaching $143 for the first time on Monday. But the contracts won’t be signed for a year, and if Western firms win a dominant role it could feed perceptions that U.S.-led forces toppled Saddam Hussein to get at Iraq’s natural resources.

Those concerns were heightened by expectations that Iraq would announce short-term no-bid consulting contracts with five Western oil firms on Monday. 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 Monday that the Iraqi government was still negotiating with the companies, which he did not identify. He said the firms were demanding a share of oil production while Iraq wants to pay in cash.

The minister said the short-term contracts were meant to boost production until the government awards longer-term deals next June. But some believe the consulting contracts could give the winning firms an advantage in bidding for the development contracts, which al-Shahristani said Monday would include 35 foreign companies.

The firms he named included seven from the U.S., three from Britain and others from Russia, China and other countries.

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.

He said even the longer-term contracts would include cash compensation and not a share of oil production.

“We don’t see a need to allow anyone to share our oil,” al-Shahristani said.

Iraqi government spokesman Ali al-Dabbagh said Monday that there is no American influence on the Iraqi government’s oil decisions.

“Politics does not come into this,” al-Dabbagh said. “There is no preferential treatment for anyone, no matter who.”

All the oil fields the minister mentioned Monday are currently producing crude, and al-Shahristani said the new contracts would 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.

Adding 1.5 million barrels of oil each day to the world’s supply probably would move the price downward. But some analysts were not convinced it will happen, given the deterioration of Iraq’s infrastructure and potential instability.

“I’m pretty skeptical of that figure,” said Jim Ritterbusch, president of energy consultancy Ritterbusch and Associates. “Amount is one thing, timing is another. They still need to upgrade their infrastructure and while things have stabilized, I think you’re assuming a best-case scenario on security and other issues.”

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.

Al-Shahristani said the country needs help from foreign firms to boost production further because some of its oil fields “suffer from old age and need modern technology to check their deterioration.”

Iraq nationalized its oil industry in the 1960s, and participation by foreign firms since then in the development of the country’s natural resources has been limited.

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. And the Iraqi government could use the revenue to rebuild infrastructure and deliver services.

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 bidding must have an Iraqi partner and pass along at least 25 percent 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 law dividing the country’s oil resources. Negotiations have been stalled by disagreement between the central government and the Kurdish regional administration in northern Iraq. The Kurds have signed more than 20 oil deals with foreign firms to work in Kurdish-controlled fields since drafting their own oil and gas law in August 2007.

The Shiite-led Iraqi central government says the deals are invalid with no national oil law in place.

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