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Iraqi minister under pressure over oil contracts

June 23, 2009

Robin Pagnamenta

The Iraqi Oil Minister will face questions from parliamentarians in Baghdad today over the first big auction of oilfield contracts since the 2003 United States-led invasion.

Hussain al-Shahristani, who is due to announce winners for the first round of deals next week, will defend his decision to allow international oil companies, including BP and Shell, to compete openly for the contracts, which could be worth billions of dollars in the long term.

His appearance at a parliamentary committee hearing in Baghdad this morning comes after concern from some politicians that the contracts are not in Iraq’s best interests and will expose the country to exploitation by Western oil companies. “The Oil Minister must convince us why the Government should have spent $8 billion [£4.9 billion] to develop oilfields, but then offers them to foreign firms like pieces of cake,” Jabir Khalifa Jabir, secretary of the parliament’s oil and gas committee, said.

Senior executives from Iraq’s South Oil Company (Soc), which produces the bulk of Iraq’s crude, and the Iraq Drilling Company are also likely to appear at the hearing. Soc is rebelling against the contracts because they include fields in which Iraq has invested huge sums since the toppling of Saddam Hussein in 2003. A total of 32 foreign oil companies have qualified and are competing for the service contracts, under which they will be paid a fixed rate to develop Iraq’s six most productive oilfields and two undeveloped gasfields. The fields contain an estimated 43 billion barrels of Iraq’s total proven reserves of 115 billion barrels.

The auction is a part of Iraq’s drive to more than double production of oil and gas to six million barrels per day within five years, from 2.3 million barrels now. Iraq, which has the world’s third-largest oil reserves after Saudi Arabia and Iran, needs oil revenues to pay for reconstruction.

BP is bidding for the giant Rumaila field in the south. Shell is bidding for the Kirkuk field in the north and the Akkas gasfield close to the border with Syria. Rival companies from China, the US, Japan, Malaysia, South Korea, Italy, Turkey, Russia and France are want to develop the fields.

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