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Iraq set to seek foreign oil bids
28.6.2009
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June
28, 2009
BAGHDAD, Iraq,— Iraq is poised to open its
coveted oil fields to foreign companies this week
for the first time in nearly four decades, a
politically risky move in a country eager to shake
off the stigma of occupation.
Iraqi politicians and some veteran oil officials
have said the deals are unduly beneficial to oil
giants, which are viewed warily by many in this
deeply nationalistic but cash-strapped country.
Oil executives have been following the matter with
apprehension, industry analysts said, but they are
eager to get a foothold in Iraq, which has the
world's second-largest proven crude reserves and is
seen as the only major penetrable market.
"It's something the industry really wants," said Ben
Lando, editor of Iraq Oil Report, an Iraq energy
news Web site. "The number of reserves around the
world that they have access to is declining. And
Iraq has so much oil."
Iraq's Oil Ministry is expected to auction eight
contracts for six active oil fields and two largely
undeveloped gas fields Monday and Tuesday.
Thirty-five companies have been selected to submit
bids for the 20-year service contracts.
The winners will be required to give the Iraqi
government a total of $3 billion in loans. They will
be compensated for costs and will earn a per-barrel
fee for boosting production at the fields,www.ekurd.net
ravaged by years of war and sanctions.
Although the terms for investors are less than
ideal, analysts said, those who get picked in the
first round are likely to receive more lucrative
contracts in the future. The companies are also
preparing bids for a second round of contracts for
work at undeveloped fields, which Iraqi officials
expect to award in coming months.
Companies that secure the contracts will be wading
into a country with a latent insurgency, endemic
corruption and deeply divided political leaders who
have been unable to enact a hydrocarbons law.
The man leading the effort to bring in foreign
investors, Oil Minister Hussain Shahristani,
has come under attack in recent days by some
lawmakers and oil officials, who argue that Iraq
should rebuild its crippled oil sector without
substantial help from foreign companies.
Iraq's parliament does not have a formal role in
awarding the contracts, whose legality has been
questioned by some lawmakers and the autonomous
Kurdistan Regional Government in northern Iraq.
Critics say that Saddam Hussein-era laws that
stressed nationalization of Iraq's oil industry
remain in effect until a new law is passed.
"There is a majority opinion inside parliament that
opposes these bids," legislator Alia Nusaif said in
an interview, adding that the Oil Ministry should
have given lawmakers more time to examine the terms.
"We must think ahead and ensure that our future
generations are not left empty-handed because of the
ill motives of some."
Shahristani, who was questioned by lawmakers last
week during a sometimes contentious two-day hearing,
argued that Iraq cannot afford to rebuild its oil
sector without help. The recent drop in oil prices,
which has stymied government initiatives and
triggered a freeze on the hiring of security forces,www.ekurd.net
has underscored the urgent need for foreign cash and
expertise, he said.
"All experts inside and outside the government agree
on the need to repair the oil infrastructure and
expand exploration development and production,"
Shahristani said. "The country depends almost
exclusively on its oil reserves."
Iraq expelled foreign oil companies in 1972 amid a
regional movement toward nationalization. Its
national oil company performed well until the 1991
Persian Gulf War, which was preceded by sanctions
imposed by the United Nations.
Violence and the exodus of scores of technocrats
after the U.S.-led invasion in 2003 have taken a
toll on the industry. Pipelines in northern and
southern Iraq are in dire need of repair, and much
of the equipment at functioning oil fields is
outdated or underperforming.
Iraq pumps an estimated 2.4 million barrels of oil a
day. With foreign capital and expertise, oil experts
said, the figure could grow to 10 million in a few
years.
Iraq has an estimated 115 billion barrels of proven
oil reserves, second only to Saudi Arabia. Other
attractive markets, such as Venezuela and Russia,
have in recent years asserted more state control
over the industry.
The government, keenly aware of the potential for
controversy and political fallout, has sought to
portray the process as transparent. Bidders will
submit sealed proposals that will be evaluated using
a set formula during televised sessions.
The bidding process and its outcome could have
political consequences for Prime Minister Nouri al-Maliki,
who is expected to seek reelection in January. Many
Iraqis still view Maliki as somewhat beholden to the
U.S. government, and his rivals could use the oil
issue to portray him as a sellout.
"The nationalization of Iraq's oil sector was
extremely popular, but national capacity was hurt by
wars during Saddam Hussein's time and his misuse of
the oil sector," Lando said. "They had great talent,
great coordination. So Iraqis see that and say: Why
can't we re-create that rather than rely on foreign
companies?"
Former oil minister Ibrahim Bahr Uloom said the
government would have been wise to delay the process
until after the election.
"What will happen if a new government comes and a
new prime minister and a new parliament don't go
ahead with these contracts?" he asked.
Copyright, respective
author or news agency,
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