British firms gain first Iraq post-war oil contracts

By SAEED SHAH

BP and Shell are among the first foreign firms to benefit from the resumption of Iraqi oil exports, after the country on Wednesday signed its first longer term contracts to supply oil since the war ended.

The two British oil giants are among around 10 international companies that will be taking Iraqi crude, produced from the southern fields around Basra.

Iraq has held two sales of oil since Saddam Hussein was deposed but these were "spot" deals which sold an immediately available quantity of oil.

The contracts won by BP and Shell, announced by Iraq's State Oil Marketing Organisation (Somo) yesterday, are the first to offer on-going supply arrangements. The contracts were awarded after a tendering process run by Iraqi oil officials.

Analysts said it showed not only the Iraq was able to raise output but also guarantee to deliver set amounts of oil, showing more confidence in its production capabilities. The Iraqi contracts indicate the oil ministry is confident that looting and sabotage at Iraqi oil facilities will not prevent it from honouring export contracts. The news will also be seen as evidence that conditions in the country are becoming more stable.

Under the deal, Iraq will supply 645,000 barrels per day (bpd) for export, or 20 million barrels a month, from its Gulf port of Mina al-Bakr, from August till the end of December. That will be an increase on the 450,000 bpd produced in July but still leave Iraqi exports at only a third of pre-war levels, with no plans yet for export from the northern Kirkuk fields.

BP and Shell will each send one very large tanker a month to Iraq to pick up their 2 million barrels apiece, equivalent to 60,000 a day Among the other companies that are thought to have signed deals with Iraq are ChevronTexaco and ConocoPhillips of the US and China's Sinochem. Iraqi officials are still negotiating with other companies.

One Iraqi oil ministry official said: "We are receiving offers from many companies, and we are going to evaluate them one by one."

Iraq has the world's second-largest proven oil reserves, and the longterm contracts will generate steady income for the first time since the US-led invasion. In the north, oil exports have not been possible because a pipeline used to transport the oil to a port, in Turkey, has been sabotaged.

- INDEPENDENT

Herald Feature: Iraq