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The Peninsula Qatar: Multinationals eye prized oil fields in Iraq

Web posted at: 8/12/2007 3:32:21: Source: AP

DUBAI • As the deadline nears for the US military commander in Iraq to report on the country’s political progress, international oil companies are forging alliances to develop its prized fields.

US General David Petraeus has until mid-September to submit his report to Washington and oil multinationals believe there could be progress on Iraq’s oil law when parliament resumes early next month.

Washington has for months pushed Iraq to speed up passage of the oil law and other legislation, seen as vital to curbing sectarian violence between majority Shi’ites and minority Sunni Arabs.

“With the oil law potentially around the corner, the sense among big oil companies is they have to do something,” said one oil company executive. “Although the reality with the security situation is that they can’t do anything on the ground.”

Oil companies have been manoeuvring for years to win stakes in Iraq’s oilfields. Iraq has the world’s third-largest oil reserves, and companies hope the new law will allow them a rare opportunity for access to the Middle East’s energy resources.

Russia’s Lukoil was counting on government pressure on Thursday to revive a $4bn Saddam-era deal to develop the huge West Qurna oilfield.

Moscow was expected to press for a bigger role in Iraq’s oil industry in return for writing off $10bn of debt during a visit by Iraq’s Oil Minister Hussain al-Shahristani.

US major ConocoPhillips, which has a 20 per cent stake in Lukoil, has said it wants to be an active partner in West Qurna if security and legal conditions allow.

Other companies have forged partnerships in the race for Iraqi oil, including US major Chevron and French energy company Total.

For Total, teaming up with Chevron allays concerns it will be at a disadvantage if US companies get preferential treatment at the negotiation table, oil industry sources said.

Chevron benefits from Total’s knowledge of the huge Majnoon and Bin Umar fields. Total had exclusive negotiating rights for those fields under Saddam.

Royal Dutch Shell is working together with Australia’s BHP Billiton on studies for the Missan area. Shell was also working on a master plan for development of Iraq’s gas reserves with Japan’s Mitsubishi.

Other alliances were likely to form, and buyouts of smaller companies already operating in Iraq were also possible once the security situation improved, industry sources said.

“It’s a dynamic situation,” said another oil company executive. “Most companies are keeping their powder dry regarding partnerships. What if you pick the wrong one? Some companies may be positioning to buy others or sign deals once things change in the south.”

Dozens of companies looking for future contracts have signed memorandums of understanding with Iraq since the US-led invasion in March 2003, providing field studies, technical assistance and training for Iraqi officials.

After waiting in vain for months for Baghdad to pass the federal oil law, the semi-autonomous Kurdish region’s parliament passed its own legislation on Monday.

“This might provide the extra push to get things moving in the central government,” said Colin Lothian, senior analyst for the Middle East at global consultancy Wood Mackenzie.

http://www.thepeninsulaqatar.com/Display_news.asp?section=World_News&subsection=Gulf%2C+Middle+East+%26+Africa&month=August2007&file=World_News2007081233221.xml

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