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CBC News: Iraqi cabinet gives green light to oil ministry to sign oil deals

Published: Wednesday, March 5, 2008 | 5:34 AM ET
Canadian Press: Sinan Salaheddin,

BAGHDAD – Iraq’s cabinet has given the green light to the Oil Ministry to sign agreements with international oil companies to help increase the country’s crude output, a ministry official said Wednesday.

The two-year deals, known as technical support agreements, or TSAs, are designed to develop five producing fields to add 500,000 barrels per day to the country’s current 2.4 million barrels per day output.

Last December, Royal Dutch Shell PLC (RDSB), BP PLC (BP), ExxonMobil Corp. (XOM) and Chevron Corp. (CVX) submitted technical and financial proposals for the five oil fields and received counter proposals from the Iraqi side.

In January, representatives from the companies and from Iraq met again in Amman, Jordan, and they will hold the third round of discussions later this month, said the official, who spoke on condition of anonymity as he was not authorized to release information.

In Vienna, Iraq’s Oil Minister Hussein al-Shahristani said that Iraq intends to compensate these companies with crude oil rather than in cash, the Dow Jones Newswires reported on Wednesday.

Speaking to reporters as he arrived for a meeting of the Organization of Petroleum Exporting Countries, al-Shahristani said the Oil Ministry was still working on the compensation details with the Development Fund of Iraq, controlled by the U.S. and the UN.

According to the Oil Ministry official, BP will submit a proposal for the Rumaila oil field, Chevron for West Qurna stage 1, Exxon for Zubair, and Shell for Missan and Kirkuk.

Iraq’s average production was 2.4 million barrels per day in January while exports stood at an average of 1.92 million barrels per day. December’s exports averaged 1.81 million barrels per day.

In dire need of expertise from international oil companies to achieve the Oil Ministry’s target of three million barrels per day by the end of 2008, Iraq has been relying on a Saddam Hussein-era natural resources law until Parliament approves a new oil law to regulate the international oil companies’ work and share Iraq’s oil resources among the country’s Shiites, Sunni Arabs and Kurds.

More than 70 international firms met the ministry’s deadline of Feb. 18 to compete for tenders to help develop Iraq’s oil reserves, seen as vital to providing the funds to rebuild the shattered country.

Iraq has not said what fields it will tender, or on what terms, but the service and extraction contracts on offer are seen as a stopgap until the oil law is passed, and will not provide the long-term involvement big oil companies want.

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