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Baghdad opens door to foreign developers

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Baghdad opens door to foreign developers

By Ed Crooks in London

Published: July 1 2008 03:00 | Last updated: July 1 2008 03:00

Iraq yesterday invited foreign companies to bid for contracts developing eight of its oil and gas fields, launching a process that will let big international oil companies back into the country for the first time in more than 30 years.

Hussein Shahristani, oil minister, said the six oilfields being offered for tender were the “backbone” of Iraq’s industry, and hoped foreign investment would help lift output to 4.5m barrels per day by 2013, from 2.5m b/d today.

But Mr Shahristani specified conditions attached to the contracts, including that companies would be asked to work as service providers, rather than taking a share of oil production, and that Iraq’s national oil companies should have at least a 25 per cent stake in any project.

The conditions illustrate the extreme political sensitivity of allowing western oil companies into Iraq, where many people believe the US-led invasion of 2003 was designed to seize control of the country’s resources.

There have been delays to technical service agreements with large oil companies, which Iraq had hoped to announce yesterday.

Under the agreements, leading oil companies such as ExxonMobil, BP, Total and Royal Dutch Shell would be paid for providing training and consultancy services to Iraqi oil engineers.

A person close to the negotiations said the government had recently decided to cut the agreements’ duration from two years to one, meaning that more work on the deals was needed.

Jeroen van der Veer, chief executive of Royal Dutch Shell, said he hoped the agreements could be signed in “a matter of weeks”.

Iraq hopes that the advice and support provided in the agreements will add 500,000 b/d to its oil output, with a further 1.5m b/d by 2013 as a result of the involvement of foreign companies in the development contracts.

Forty-one companies have qualified to bid for those contracts, of which six are national oil companies whose names have not been released. The 35 named by Iraq include all the big western oil companies as well as Asian groups such as Mitsubishi of Japan, Petronas of Malaysia, Kogas of Korea, Gazprom and Lukoil of Russia, and China’s CNPC and CNOOC.

Mr Shahristani hoped the development contracts could be signed by June next year.

However, oil companies have warned that they will need legal certainty about contract terms before they invest, and that is unlikely to be available until the country’s long-delayed oil law has been passed. Iraq’s insistence that the contracts should bring in foreign companies as service providers may also cause problems.

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