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Iraq makes historic return to oil sales as PM calls for British troops to leave

Daily Telegraph

Iraq has moved to put itself at the centre of the global oil industry as it launches its first sale of production rights to Western companies at a summit in London. 

The recent drop in violence across Iraq has increased the prospects of Baghdad doubling its oil output by 2012 by allowing foreign investors to bring the most advanced production techniques to the war-torn country.

Iraq was at the forefront of world-wide oil production until the Ba’athist regime nationalised the industry in the 1970s. Although Saddam Hussein made deals with French, Russian and Chinese oil companies in the 1990s, United Nations sanctions barred the country’s re-emergence as a leading source of energy supplies.

Representatives of 35 companies have been given six months to apply for a 20-year right to operate oilfields that hold up to 40 per cent of the country’s 115 barrels of proven reserves. Hussain al-Shahristani, Iraq’s Minister for Oil, convened the meeting at a Park Lane hotel in central London. Aides said the location was deliberately chosen to demonstrate that Iraq had shed its old pre-occupations about foreign powers dominating the industry, which generates ninety per cent of its annual income.

A British firm is acting as Baghdad’s strategic advisor as it overhauls its most important asset. The firm, Gaffney, Cline and Associates, was responsible for a presentation given by Mr Shahristani to the executives. The major British oil firms BP and Shell are seen as leading contenders to gain access to the six major oil fields and two gas fields on offer.

Baghdad hopes to sign the final agreements by next June, months before the country’s ruling coalition of Shia and Kurdish parties face the second democratic general election since the 2003 campaign to depose Saddam. But the exercise has kicked-off without a final agreement on a national oil law, a key measure that Baghdad has been under immense pressure to enact.

Enthusiastic bidding despite a recent drop in oil prices would translate into a political windfall for the government. “International interest will be extremely high,” said Muhammad-Ali Zainy, senior analyst at the Center for Global Energy Studies in London. “The Iraqi oil industry has been stagnant – and has actually been deteriorating – and it’s time to open it to foreign direct investment.”

Shell became the first big British oil company to open an office in Baghdad last month. In a signal it had Baghdad’s seal of approval, the company was granted a £2 billion deal to modernise an existing gas field.

Critics of the war suggested yesterday’s conference represented the breakthrough America and Britain had sought at the outset of the war, a claim that ignored China’s equally strong position in the pursuit of Iraqi resources. China has already secured a £1.78 billion deal to renew an agreement it signed with Saddam under sanctions.

Nouri al-Maliki, Iraq’s prime minister, declared the country was keen to deepen its economic co-operation with British companies despite his call for UK troops to withdraw from the Iraqi frontline by the end of the year. “Definitely, the presence of this number of British soldiers is no longer necessary,” he said. “We thank them for the role they have played, but I think that their stay is not necessary for maintaining security and control.”

Mr Maliki said differences over British forces failure to control violence in Basra would not affect overall ties between Baghdad and London. “Our relationship now is good and we are working to improve it further in other fields as we take over responsibility for security,” he said. “The Iraqi arena is open for British companies and British friendship, for economic exchange and positive cooperation in science and education.”

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