Iraq invites oil investment but the majors stay away
- The Observer,
- Sunday June 29, 2008
Iraq is expected to invite bids to develop dozens of its oil fields this week, but the world’s oil majors are still shunning the country. It will unveil its first licensing round since the war ended over five years ago.
The Iraqi oil ministry wants the big oil companies to contribute major investment, personnel and expertise to boost production. But the majors are refusing because the ministry is not offering production-sharing agreements that allow them to add Iraqi oil to their reserves and make more profit the more oil they pump.
Instead, on offer are limited ‘technical service agreements’ which pay a fixed amount to companies and involve training Iraqis overseas, providing equipment, scoping and consultancy services.
So far no oil major has stationed staff in Iraq because of the security situation – and because the financial rewards are not big enough. The oil ministry is expected within days to award six two-year service contracts to develop six giant fields to Shell, BP, ExxonMobil and Total.
But David Horgan, managing director of AIM-listed Petrel Resources, which operates in Iraq, said: ‘These service contracts involve insufficient incentive for majors to put their people and capital at risk on the ground. Providing services from afar will not dramatically boost Iraqi production.’
Greg Muttitt, co-director of the campaign group Platform, explained the popular opposition to production sharing agreements: ‘Most Iraqis believe that the oil should remain in the public sector and in Iraqi hands,’ he said.
http://www.guardian.co.uk/business/2008/jun/29/oil.oilandgascompanies1
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