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Iraq opened international bidding for eight enormous oil and gas fields yesterday, paving the way for major investments in a nation with one of the world's largest petroleum reserves.
If the contracts are approved, they could lead to the biggest foreign stake in Iraq since the industry was
nationalised more than 30 years ago.
That could be good news with the price for a barrel of oil breaching US$143 ($188) for the first time yesterday. But there are concerns that a dominant role for Western firms could feed perceptions that US-led forces toppled Saddam Hussein to grab the country's natural resources.
Those concerns were heightened recently by expectations that Iraq would announce short-term no-bid contracts with five Western oil firms for technical consulting. 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 said Iraq was still negotiating with the companies, which he did not identify. He said the firms were demanding a share of oil production, but Iraq insisted on paying in cash.
The minister said the short-term contracts were meant as a stopgap measure to boost oil production until the government awards longer-term deals next June.
But some believe they could give the Western firms a bidding advantage in that process, which al-Shahristani said Monday would include 35 foreign companies. The firms he named included seven from the US, three from Britain and others from countries like Russia and China.
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.
All of the oil fields the minister mentioned 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.
The introduction of an additional 1.5 million barrels of oil each day would likely be enough to move the price for a barrel downward. But some analysts were not convinced, given the deterioration of the Iraq's infrastructure and potential instability, that it is realistic.
"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 US-led invasion in 2003 because of a cut in violence, but al-Shahristani said the country needs help from foreign firms to boost production further.
The deadline for the oil and gas bids is the end of March, and preliminary contracts will be signed next June. Every company involved in the bidding process must have an Iraqi partner and must give at least 25 percent of the value of the contract to Iraqi companies, said al-Shahristani.
The process of awarding contracts has been delayed by the inability to finalise a new a law on how to divide the country's oil resources because of squabbles between the central government and the Kurds.