TOPICS > Economy

Iraqis Open Oil to Foreign Firms to Boost Output

BY Admin  June 30, 2008 at 10:10 AM EST

An oil field in southern Iraq; AP photo

The decision to allow foreign firms to invest in its oil industry represents an Iraqi policy break from many of its major oil-producing neighbors like Saudi Arabia and Kuwait — who keep tight control of foreign involvement in their oil sectors.

“The six oilfields that have been announced today are the backbone of Iraq’s oil production, and some of them are getting old and production is declining,” Oil Minister Hussain al-Shahristani said, according to Reuters.

The possible participation of Western companies like BP, Chevron, Exxon Mobil, Shell and French energy giant Total SA in Iraq’s oil industry has raised concerns in recent weeks following published reports that several were close to signing no-bid short-term contracts with the Iraqi government, the Associated Press reported.

Five years after the U.S.-led invasion of Iraq to oust former leader Saddam Hussein, the potential involvement of U.S. and British oil firms is likely to anger some in the region who believe the U.S. initiated the Iraqi conflict to gain control of its oil production. The U.S. has repeatedly denied this claim.

Iraqi government spokesman Ali al-Dabbagh denied American influence on the Iraqi government’s oil decisions, saying “politics does not come into this,” according to the AP.

A group of key short-term oil contracts — intermediary measures to boost production while the Iraqi parliament hammers out a national oil law — are expected to be announced later Monday, according to media reports. Iraqi Oil Minister Hussain al-Shahristani also named 35 companies that would be qualified to bid on service contracts for the oil fields of Rumeila, Zubair, Qurna West, Maysan, Kirkuk and Bay Hassan.

“These fields were chosen because their production can be raised in a short time and at a low cost,” said al-Shahristani, according to the AP.

The short-term deals, each worth about $500 million, are aimed at quickly lifting output at Iraq’s largest producing fields by a combined 500,000 barrels a day, Reuters reported.

The deadline for the longer-term oil and gas bids is the end of March. Every company involved in the bidding process must have an Iraqi partner and must give 25 percent of the value of the contract to Iraqi companies, said al-Shahristani.

As oil prices continue to soar to record levels worldwide — prices passed $143 per barrel in early Monday trading — Iraq’s untapped reserves are even more appealing to foreign companies. Iraq has an estimated 115 billion barrels of oil reserves and some 112 trillion cubic feet of natural gas, according to government figures.

The Iraqi government also opened the natural gas fields of Akkaz and Mansouriyah for bidding on Monday.