Iraq to open up oil fields for first time in four decades
June 29, 2009
http://business.theage.com.au/business/iraq-to-open-up-oil-fields-for-first-time-in-four-decades-20090629-d1gz.html
Iraq will this week unveil which foreign firms have won contracts to develop its oil and gas fields, nearly four decades after Saddam Hussein nationalised the country's energy infrastructure.
The deals, likely to be announced live on television on June 29 and 30, will provide the government with much-needed revenue as it struggles to rebuild the country after three wars and 20 years of debilitating economic sanctions.
Thirty-one companies have submitted bids to develop six giant oil fields and two gas fields. The oil deposits, holding known reserves of 43 billion barrels of crude, are in southern and northern Iraq while the gas concessions are west and northeast of Baghdad.
"Our principal objective is to increase our oil production from 2.4 million barrels per day to more than four million in the next five years," Oil Minister Hussein al-Shahristani said in an interview with Iraqi public television.
Increasing production to that level will, according to him, pump an extra $US1.7 trillion ($2.11 trillion) into government coffers over the next 20 years.
Shahristani has said that only $US30 billion ($37.31 billion) of that sum will go to the companies that have extracted the oil.
"This is a huge amount that would finance infrastructure projects across Iraq -- schools, roads, airports, housing, hospitals," he said, insisting that the country would retain control over its oil reserves.
For energy firms, meanwhile, the appeal of the Iraqi contracts is the chance to plant a foot firmly in the country, the first time such an opportunity has been offered since Saddam nationalised the Iraq Petroleum Company in 1972.
A source involved in the bidding, who spoke on condition of anonymity, described Iraq as "one of the rare countries in the world where the coming decades will bring real growth in production."
"It's a rare opportunity," the source said.
Not all energy companies are happy, though, with the terms of the contracts being offered by Baghdad.
The foreign firms awarded deals to work here will have to partner with Iraqi government-owned firms, principally the South Oil Company (SOC), and share management of the fields despite fully financing their development.
They will be paid a fixed fee per barrel, not a share of the profits, and the fee will only be paid once a production threshold set by the government is reached.
Domestic firms, including SOC, are furious, however, that contracts are being awarded to their foreign counterparts.
Jaber Khalifa Jaber, head of the Iraqi parliament's oil and gas committee and a Fadhila MP, said Iraq is under threat from an "economic occupation".
"The companies will just share the oil between the Americans, the French, the British and the Japanese ... just like the Sykes-Picot agreement," he told AFP, referring to the Anglo-French accord that divided up influence in the Middle East in 1916.
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