Iraqi Oil Update  

The Australian has an update on the fate of Iraq's oil, or as they put it, they Iraqi government (although not the parliament) is holding a "welcome-back party for Big Oil" - Shahristani plan to help rebuild war-ravaged economy.

The government intends to auction off oil contracts to foreign companies for the first time since Iraq nationalised its oil industry more than three decades ago. If all goes according to plan in the first round, foreign oil companies will move in to help Iraq revive production at six developed fields that have suffered from years of war and neglect.

But Iraq's fractious politics have complicated the process. Some lawmakers and oil officials have called for a delay of the auction. The man behind the plan, Oil Minister Hussain al-Shahristani, appeared before Parliament yesterday, where some lawmakers questioned the legality of the proposed contracts and what they called favourable terms for the foreign companies.

But the auction appears to have sufficient political support to go ahead on schedule, and Mr Shahristani and other government officials vowed to plow ahead.

Mr Shahristani's oil deals are crucial to this war-torn country's economy. Iraq is thought to have one of the world's largest supplies of crude oil, with 115 billion barrels in proven reserves. But foreign know-how is the key to its plans to boost oil output to four million barrels a day within four to five years, from 2.4m barrels now.

Despite security risks, Western oil companies are clamoring to get in. Iraq is still relatively unexplored, offering big companies a potentially easy-to-tap source of growth. Some are touting Iraq as the most important opening of petroleum fields since the discovery in 2000 of the giant Kashagan field in the Caspian Sea.

Some 120 companies have expressed interest in bidding for the contracts at the June 29 and 30 auction, according to the Oil Ministry. Thirty-five companies qualified to bid, including Exxon Mobil, Royal Dutch Shell, Italy's Eni, Russia's Lukoil and China Petroleum & Chemical, or Sinopec. The six oil fields at stake are believed to hold reserves of more than 43 billion barrels. Foreigners will not get the most prized piece of the action - ownership stakes in the reserves - but will be paid fees for ramping up output.

Just over 20 out of about 80 known oil fields in Iraq have been fully or partially developed, and most of its production comes from just three giants, north and south Rumaila and Kirkuk. Because lots of the black gold is considered relatively easy to extract, oil experts estimate that exploration and development in Iraq costs $US1.50 to $US2.25 ($1.60) a barrel, compared with about $US5 in Malaysia or $US20 in Canada. ...


Western oil companies were kicked out of Iraq in 1972, amid of a wave of nationalisation of Middle East petroleum. Oil production hit at least three million bpd before Iraq invaded Kuwait in 1990, then fell sharply to 300,000 barrels after economic sanctions and trade embargoes were imposed. Production rebounded to about 2.5 million barrels before the US invasion in 2003.

Iraqi lawmakers have squabbled for years over a draft petroleum law that would set a legal framework for foreign companies to start drilling again. Tired of waiting, Mr Shahristani in 2008 unilaterally invited oil companies to bid on contracts. As global companies are reluctant to explore undeveloped fields in Iraq without an oil law, Mr Shahristani has focused on getting foreign help to pump from existing fields.