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Iraq seeks to reassure on fairness as it opens industry to foreign bidders

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Iraq seeks to reassure on fairness as it opens industry to foreign bidders

By Roula Khalaf and Ed Crooks in London

Published: July 4 2008 03:00 | Last updated: July 4 2008 03:00

The Iraqi government yesterday sought to counter criticism of the opening of its oil sector to international participation with reassurances that the process would be transparent.

Ali Dabbagh, government spokesman, said the service contracts would be awarded on the basis of competition and no company would be given preference.

The oil ministry this week invited foreign companies to bid for contracts to develop eight oil and gas fields, starting a process that could return international oil companies to Iraq for the first time in three decades.

However, the ministry, desperate to raise Iraqi oil production from the current 2.5m barrels per day, decided to proceed with the bids despite the failure of Iraqi political factions to agree on a new hydrocarbons law. The legislation would regulate foreign participation and establish fair distribution of oil revenues among the country’s main sectarian groups.

The absence of a new oil law has provoked warnings that the process must not be seen as an oil grab, five years after a US invasion denounced in many parts of the Middle East as an attempt to gain control of Iraq’s oil resources.

Even as Baghdad launched the bidding round this week, more modest contracts under negotiations with oil companies for the past nine months have been facing complications.

The technical support contracts would see companies such as ExxonMobil, BP, Total and Royal Dutch Shell paid to provide training and other assistance to Iraqi engineers in the hope of raising Iraqi oil output by 500,000 barrels per day.

The deals, which Iraq had hoped to announce this week, have already been delayed. Lawmakers were yesterday quoted by Reuters as saying that the short-term contracts might not be signed at all. Reuters cited payment terms as one obstacle to an agreement and one person familiar with the negotiations said the contracts appeared to have provoked political opposition within the government.

An oil ministry spokesman told the Financial Times yesterday that the negotiations on the technical support agreements were continuing and that the contracts would still have to be reviewed by the ministry and sent to the cabinet for approval.

“There’s no decision yet,” said Assem Jihad, the spokesman. “There could be some disagreements but all sides try to solve them.”

However, the companies were only yesterday given confirmation of Iraq’s plan to cut the duration of the contracts from two years to one, and will need to reassess their proposed work programmes as a result.

www.ft.com/iraqoil

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