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Middle East
Iraq offers oil contracts
Oil minister says Iraq needs foreign assistance but must control energy profits.
Last Modified: 30 Jun 2008 19:19 GMT

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Iraq has opened the world's third largest oil reserves to foreign firms by offering limited contracts at six fields.

The oil ministry hopes that granting multinationals technical contracts can help boost production at Iraq's under developed oil fields by providing equipment and training, while Baghdad would keep control of the profits.

The Iraqi oil ministry had been expected to announce the deals with companies such as Shell, ExxonMobil, Chevron, Total and BHP Billiton on Monday.

But Hussein al-Shahristani, the oil minister, told a news conference that the deals had not yet been concluded as the companies wanted a share of the profits.

"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," he said.
  
"The TSAs [technical support agreements] are only simple consultancy contracts to help us raise the production during the interim period" before the ministry enters into long-term contracts to develop the oil and gas fields.

The contracts would not allow investments by the foreign companies in the oil sector but would pave the way for global energy giants to return to Iraq, 36-years after being told to leave by Saddam Hussein, Iraq's former president.

'No privileges'

Shahristani stressed that Iraq needed the services of experienced companies to realise the potential of its reserves but added that it was not ready to do so at any price.
  
"It is not possible for Iraq which has large oil reserves to stay at the current level of production. Iraq should be the second or the third source of oil exportation," the minister said.
  
"We went to these global companies and asked them to offer us consultancy but they will have no privileges or will not get a share of oil."

The head of British-Dutch oil company Shell said on Monday that he still hoped to sign a deal with the Iraqi government but suggested that the process could take months.
  
"I hope it [a deal] is within weeks and not months," Jeroen van der Veer, the chief executive, told reporters on the sidelines of the World Petroleum Congress.
  
Antonio Brufau, the head of Spanish oil group Repsol YPF, said that "many things have to be clarified before signing in Iraq".

Extraction contracts

The oil ministry also plans to sign longer-term contracts for extracting oil with 41 other foreign energy companies, according to officials.

"We chose 35 companies of international standard, according to their finances, environment and experience, and we granted them permission to extract oil," Asim Jihad, oil ministry spokesman, said.
  
Six other state-owned oil firms from Algeria, Angola, Pakistan, Thailand, Turkey and Vietnam have also been selected to compete for extraction deals.

Jihad said the selected companies will have the first right  to develop the fields once competitive bidding comes after the nation's long-delayed hydrocarbons law is passed by parliament.

Iraq wants to increase oil output by 500,000 barrels per day (bpd) from the current average production of 2.5 million bpd, equal to the amount being pumped before the US-led invasion in March 2003.

Exports of 2.11 million bpd currently form the bulk of the war-torn nation's revenues.
 
The oil ministry is keen to raise capacity over the next five years to 4.5 million bpd.

Iraq's crude reserves are estimated at about 115 billion barrels.

However, Iraq's oil is lacking in infrastructure and the latest technology, because it was denied access under years of international sanctions after the 1991 Gulf War.

Source:
Al Jazeera and agencies
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