Iraq to Open Oil
Fields for 35 Foreign Companies; Initial No-Bid
Contracts Delayed
NY TIMES:
BAGHDAD —
Iraq announced Monday that it was opening
six key oil production fields to more than 30
foreign companies, while delaying an
announcement on a series of no-bid consulting
contracts with a handful of Western oil
companies.
Iraq’s oil
minister, Hussain al-Shahristani, speaking at a
news conference here, said Iraq would begin
taking bids later this year for longer-term
contracts on six of its oil fields. Thirty-five
foreign companies have qualified to participate.
Winners will be announced in 2009, Mr.
Shahristani said.
Iraq hopes to
almost double its production, to 4.5 million
barrels of oil a day over the next five years
from the current 2.5 million barrels, Mr.
Shahristani said. The contracts are aimed at
helping the country do that.
Iraq had been
expected on Monday to issue its first contracts
to foreign oil companies that would provide
technical support and help raise Iraqi oil
production ahead of awarding lucrative long-tern
contracts.
Those initial
short-term contracts, with Exxon Mobil, Shell,
Total, BP and Chevron, are still under
negotiation, a person close to the talks said,
and will probably be completed in the next
month.
The reason for
the delay was unclear.
Chevron said in a
statement that it was “continuing to negotiate”
with the Oil Ministry on the short-term
technical contract on an oil field called West
Qurna, which is currently producing.
“The ministry has
separately announced a tender for full field
development and Chevron has been prequalified to
participate in that bid round,” the company
said.
Mr. Shahristani
defended the way Iraq has handled the oil
contracts, which have led to criticism in the
Arab world and abroad, where suspicions run
rampant that the United States-led invasion was
at least partly about access to Iraq’s oil.
The initial
contracts are expected to be awarded without
competitive bidding, but Mr. Shahristani told
the news conference, “There will be no privilege
for any of those companies to participate in
future contracts.”
Bloomberg News
quoted the chief executive of Shell, Jeroen van
der Veer, as saying at the World Petroleum
Congress in Madrid that the company expected to
sign oil agreements with Iraq in “a matter of
weeks.”
A major legal
question hangs over the process: Iraq has yet to
pass a law that divides oil revenue among all
parts of the country.
Iraq has some of
the largest oil reserves on earth, but they are
largely untapped because the country has long
lacked the resources to develop them. The
companies will provide equipment and expertise
to refurbish the country’s aging infrastructure.
The six fields
“are producing now, but there is a need for
development because they were established years
ago,” Mr. Shahristani said.
Iraq will open eight oil-and-gas fields to
foreign petroleum companies in an effort to
accelerate production in the next few years, in
what would be the most extensive upgrade of
producing fields since the fall of Saddam
Hussein.
Wall Street Journal: The Iraqi oil
ministry announced contracts to develop six oil
fields and two natural-gas fields would be put
out to bid by the end of the year. But the
ministry didn't award some expected but
controversial short-term consulting deals that
critics complained were improperly limited to
companies based in the U.S. and its allies.
Many giant undeveloped regions believed to
hold huge amounts of oil weren't included in
this first round of bidding. Development of them
was postponed until the Iraqi government agrees
on a law governing hydrocarbon investments.
While the ministry's announcement was a step
toward boosting production and bringing in
foreign oil companies to help, many hurdles
remain in Iraq's quest to become a major
oil-producing country again.
The ministry lacks enough experienced
personnel to negotiate contracts, political
divisions are slowing passage of the hydrocarbon
law and violence makes it unlikely foreign
companies would commit many geologists and
engineers to work in Iraq, according to experts
at oil companies, the U.S. government and
oil-industry consulting groups.
The difficulty getting the Iraqi oil industry
completely back on track is highlighted by the
fact that the limited-scope consulting deals are
still under negotiation, even though the
ministry said Monday was the deadline for
getting them concluded.
The ministry said it wants to press ahead
with the more-ambitious development deals for
the eight oil-and-gas fields. About 40 foreign
oil companies, from the U.S., Europe, Japan,
China, Russia and elsewhere have been approved
by the oil ministry to bid on those contracts.
The slow progress also shows how difficult it
remains to meet Iraqi goals of boosting
production by 1.5 million barrels a day in the
next couple years. Iraq now produces more than
2.5 million barrels of oil a day, up from 1.9
million barrels a day last year, but far below
the 3.5 billion barrels the country produced in
1979, according to statistics compiled by BP
PLC.
Hopes that Iraq's oil output will
dramatically increase -- providing much-needed
supply for global markets and money for Iraq's
government -- are riding on the country's
ability to pass a law that will spell out the
legal and financial details of investing in the
oil sector. Until then, the hunt for new fields
in Iraq is on hold.
The legislation has been bogged down for more
than a year, largely because of differences
among Kurds and Baghdad officials over who has
control over signing contracts for development
and other issues. The oil legislation isn't
expected to be considered by parliament until
the October legislative session at the earliest,
said independent Kurdish lawmaker Mahmoud
Othman.
The Kurds have negotiated 20 separate oil
deals, with companies including
Hunt Oil, which haven't been authorized by
the central government. "It's a clear violation
of the rules," said Iraq Oil Minister Hussein
Shahrastani.
"Iraq is definitely losing an opportunity
because we aren't moving fast enough," Mr.
Shahrastani said. "And that's why we aren't
waiting around for the oil law to be approved to
move forward with trying to increase our
production."
Hoping to show cohesion and progress -- even
as the consulting deals remain unsigned -- the
Iraqi oil ministry may have accomplished the
opposite. The announcement out of Baghdad was so
hard to parse that a number of big foreign oil
companies peppered advisers in Washington with
questions trying to grasp what was being
floated.
The new contracts are so-called
technical-service agreements, in which companies
receive fees for providing hands-on expertise.
The companies would prefer a production-sharing
contract, in which the company and host
government split the barrels produced.
Many foreign companies expressed interest in
bidding later this year. Iraq has the fourth
largest known reserves of oil -- after Saudi
Arabia, Iran and Canada.
Foreign oil companies have been offering
assistance and are willing to sign consulting
deals as a way to get their foot in the door of
Iraq's potentially lucrative oil industry.
"If the Iraqi government decides it wants
international oil companies to partner with them
in developing their resources,
Exxon Mobil would be interested," the Texas
company said in a statement.
The involvement of Western oil companies in
the development of Iraq's oilfields remains a
hot-button issue both in Washington and Baghdad.
There is a widespread belief in Iraq and in
certain circles in the U.S. that the war was a
smokescreen for U.S. oil companies to take
control of Iraq's oil resources, more than 30
years after they were nationalized.
|
