Iraq has opened international bidding for eight enormous oil and gas fields, paving the way for major investments in a nation with one of the world’s largest petroleum reserves. At the same time, the Iraqi government sued dozens of companies, including oil giant Chevron Corp, for more than US$10 billion on Monday, saying they paid kickbacks to former Iraqi president Saddam Hussein’s government under the UN oil-for-food program.
If the international bidding contracts are approved, they could lead to the biggest foreign stake in Iraq since the industry was nationalized more than 30 years ago.
This could be good news with the price for a barrel of oil breaching US$143 for the first time ever on Monday. But there are concerns that a dominant role for Western firms could feed perceptions that US-led forces toppled Saddam Hussein to grab the country’s natural resources.
Those concerns were heightened recently by expectations that Iraq would announce short-term no-bid contracts with five Western oil firms on Monday for technical consulting. The New York Times reported about two weeks ago that the firms included Royal Dutch Shell PLC, BP PLC, Exxon Mobil Corp, Chevron and Total.
But Iraqi Oil Minister Hussain al-Shahristani told a news conference on Monday that the Iraqi government was still negotiating with the companies, which he did not identify. He said the firms wanted to participate in oil field production rather than simply provide consultancy services for cash.
The minister said the short-term contracts were meant as a stopgap measure to boost oil production until the government awards longer-term deals next June.
But some believe they could give the Western firms a bidding advantage in that process, which al-Shahristani said on Monday would include 35 foreign companies.
The firms he named included seven from the US, three from the UK and others from countries such as Russia and China.
Al-Shahristani said the companies would be invited to bid on the oil fields of Rumeila, Zubair, Qurna West, Maysan, Kirkuk and Bay Hassan; and the natural gas fields of Akkaz and Mansouriyah.
“These fields were chosen because their production can be raised in a short time and at a low cost,” al-Shahristani said.
But he made clear that even the longer-term contracts would include cash compensation rather than a share of oil production.
“We don’t see a need to allow anyone to share our oil with the people of Iraq,” al-Shahristani said.
All of the oil fields the minister mentioned on Monday are currently producing crude and al-Shahristani said the new contracts would raise Iraq’s production by 1.5 million barrels per day.
Iraq produces 2.5 million barrels per day and hopes to raise that to 4.5 million by 2013.
The introduction of an additional 1.5 million barrels of oil each day would likely be enough to move the price for a barrel downward.
Some analysts, however, were not convinced that it is realistic given the deterioration of Iraq’s infrastructure and potential instability.
“I’m pretty skeptical of that figure,” said Jim Ritterbusch, president of energy consultancy Ritterbusch and Associates. “Amount is one thing, timing is another. They still need to upgrade their infrastructure and while things have stabilized, I think you’re assuming a best-case scenario on security and other issues.”
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