Iraq Energy Roundup

Western energy firms invited to bid on Iraqi oil development

The Iraqi government invited 35 energy firms to bid on long-term service contracts to help increase Iraqi oil production in six oil fields, officials said.

Iraqi Oil Minister Hussain al-Shahristani said Monday Baghdad selected 35 companies from Britain, China, France, India, Russia and the United States to bid on the contracts to rebuild the long-neglected oil infrastructure in Iraq, The Washington Post reported.

"The six oil fields that have been announced today are the backbone of Iraq's oil production, and some of them are getting old and production is declining," Shahristani told reporters.

The oil minister said improving technology in the oil sector could boost production capacity by as much as 60 percent.

Shahristani said none of the contracts have been signed yet, but the firms chosen were selected because of their previous relationship with Iraq oil reserves prior to nationalization in 1972. The Iraqi Petroleum Co. was a consortium of BP, Exxon Mobil, Royal Dutch Shell and Total.

Observers question the motives of Western firms, saying their increased role casts a shadow over the motivations of the 2003 invasion of Iraq as the price of oil marches to $150 per barrel.

U.S. denies involvement in Iraqi oil contracts

The United States says it played no role in the Iraqi oil contracts beyond offering technical experts to help the country develop necessary support structures.

The New York Times reported Monday U.S. officials and private consultants played a major role in Iraqi oil contracts.

"In their role as advisers to the Iraqi Oil Ministry, American government lawyers and private-sector consultants provided template contracts and detailed suggestions on drafting the contracts, advisers and a senior State Department official said," the Times reported.

U.S. State Department deputy spokesman Tom Casey, however, fought the allegations in a news conference.

"The United States was not involved in any decisions to award contracts, to make determinations of what kinds of contracts would be offered, to provide advice over what kinds of contracts would be offered," he said.

Casey reminded reporters that State Department officials and provincial reconstruction teams had worked with the Iraqi Oil Ministry to develop the necessary management capacity to support such contracts but played no role in negotiating the contracts.

"These are Iraqi contracts. They were made by Iraqis, for Iraqis," he said.

The spokesman also said the United States had urged the Iraqis to move forward on a hydrocarbon law before the country moves beyond technical service agreements with foreign energy firms.

"I think most private companies would want to see them have in effect a hydrocarbons law that makes clear what the -- again, what the rules of the road are so that everyone can have an honest understanding going in of how these things will develop and proceed," he said.

Kurdish oil contract model "immensely better"

The oil contract model touted by the Kurdistan Regional Government of Iraq is far superior to the Baghdad model, a report says.

A report for the KRG by petroleum analyst Pedro van Meurs finds the Production Sharing Contract model proposed by the KRG is "immensely better" than the Risk Services Contract model sought by Baghdad, the KRG said in a news release.

The Baghdad model "completely misaligns the interests of the investor and the host government in terms of cost efficiency," the report says.

The van Meurs report says the Baghdad contract model will result in losses of upwards of $450 billion based on the assumption there are 30 million barrels of new oil available in Iraq and using a $100 per barrel cost estimate.

Van Meurs says further that the Baghdad contracts will result in a "complete giveaway" of Iraqi natural resources based on the proposed pricing mechanisms.

Kurdish Prime Minister Nechirvan Barzani praised the report and called on Baghdad to resolve in the issue.

"In the rest of Iraq we have lost out on the immense opportunities of current high oil prices, and it would be a real shame if the Federal Oil Ministry pursues plans that will surely damage Iraq's interests even more if implemented," the premier said.

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(e-mail: energy@upi.com)