Iraq also negotiates short-term deals

Tag: petroleum products

The Iraqi government is finalizing at least five short-term no-bid service contracts with major U.S. and European companies. Iraqi Oil Ministry officials said Monday that the firms were selected because most had extensive experience in Iraq's oil industry before nationalization.

The precursors of Exxon Mobil, Royal Dutch Shell, BP and Total were part of the Iraq Petroleum Co., which ran Iraq's oil industry for half a century. BP has information dating to the 1920s on Iraq's oil reservoirs.

"They have geographical studies and other analyses," said Asim Jehad, an Oil Ministry spokesman. "They can advise us, supply us with what we need and bring new technology." Chevron was also among the companies selected for the short-term contracts.

An official at one of the companies, who spoke on the condition of anonymity because negotiations were continuing, said each contract could be worth hundreds of millions of dollars, including the cost of some new equipment. Each of the five contracts would set a goal of increasing oil output by 100,000 barrels a day by late 2009 or mid-2010.

On Monday, Iraqi Oil Ministry and oil company officials said none of the short-term contracts, ranging from 18 months to two years in duration, had been signed yet. Oil industry sources said negotiations have bogged down over several issues, including whether the companies would be paid in oil or cash.

The companies have been providing training, analysis and advice for the past three years, without being paid. None of the companies has sent personnel because of security concerns.

More important than the size of the short-term contracts, however, is the prospect of getting a foot in the door in Iraq, whose proven reserves trail only those of Saudi Arabia and Iran. In an interview last week, Chevron's executive vice president for exploration and production, G.L. Kirkland, said the service contracts were "a starting place" and allowed the companies to "prove what we can do and hopefully open the door" for other oil development deals.

In recent months, sharp declines in violence have allowed Iraq to increase production levels to 2.5 million barrels a day, its highest since the U.S.-led invasion in 2003. With the new foreign deals, said Jehad, Iraq hopes to boost production to 4.5 million barrels a day within five years.

Ismael al-Hadidi, who works in an oil refinery in the city of Baiji, north of Baghdad, welcomed the foreign oil firms. "Iraq right now needs a lot of technical expertise to help it to move forward in oil," he said.

Abdul Kareem, 48, an engineer in oil-rich Maysan province, said foreign involvement would create new jobs and allow engineers like him to learn the latest technology and skills.