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Oil instead of cash for Iraq oil deals

  |   March 11, 2008 at 7:08 PM
BAGHDAD, March 11 (UPI) -- Iraq's oil minister confirms crude in lieu of cash is a major consideration for upcoming contracts, despite U.N. roadblocks.

High oil prices and slowly increasing oil production could increase the value of the barter. A 2003 U.N. resolution, extended through at least the end of this year, mandates "all export sales of petroleum, petroleum products, and natural gas from Iraq … shall be made consistent with prevailing international market best practices. … All proceeds from such sales shall be deposited into the Development Fund for Iraq," an account in the Federal Reserve Bank of New York.

The resolution dedicates 5 percent of oil sales to compensate Kuwait for the 1991 war and protects the funds from Iraq's multibillion-dollar creditors.

A report by the International Advisory and Monitoring Board, the auditor of the DFI, expressed "concern" over paying with oil instead of cash in Iraq's economy. "The use of barter transactions makes it difficult to determine whether fair value has been received for Iraq's oil export revenues," according to a just released IAMB report.

World Petroleum Argus reports the largest expense of the soon-to-be-signed Technical Support Agreements is equipment needed to increase production in five key fields by a combined 500,000 barrels per day.

"Remuneration for the service itself is not much at all," Oil Minister Hussain al-Shahristani told WPA.

The TSAs -- being negotiated with BP, Shell, ExxonMobil, Total and Chevron, according to sources United Press International spoke to -- would also provide training to Iraqi workers. The equipment needed is valued at $2 billion altogether, WPA reports.

The fields under negotiations are Kirkuk, Rumailah and West Qurna, and possibly Zubair, Abu Zorgan, Fauqi and/or Subba and Luhais, according to UPI's sources.

Oil Ministry spokesman Assem Jihad told UPI the crude-instead-of-cash option was being negotiated, but any decision would conform to U.N. mandates and Iraqi law.

© 2008 United Press International, Inc. All Rights Reserved. Any reproduction, republication, redistribution and/or modification of any UPI content is expressly prohibited without UPI's prior written consent.
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