Global Policy Forum

Iraq to Talk with Big Oil Companies


By Mariam Karouny

August 2, 2006

Iraq is expected to start talks with major companies in two months to develop its oilfields and some are eager to begin work even before a hydrocarbon law is in place, its oil minister said on Wednesday. "I think within two months we will begin talking to the companies and negotiate and decide the fields which need to be developed," Oil Minister Hussain al-Shahristani told Reuters in an interview.

Shahristani said he had met officials from the major oil companies, American and European, during a visit to Washington with Prime Minister Nuri al-Maliki last week. "We talked about Iraq's vision and plans. The companies were happy. In return the companies expressed their readiness to start working immediately," he said. "They (the companies) told us that the security situation does not stop them from working here because they work in difficult conditions in other countries," he added. "Some companies said they were ready to work before the hydrocarbon law is approved." Shahristani reiterated that the law, which will set oil policy, is likely to be passed by the end of the year.

Oil is the country's main source of the hard currency needed to rebuild its economy, and the energy sector is struggling to recover from years of mismanagement and sanctions.

Production Ambitions

Iraq needs to attract investment from international oil companies if it is to hit Shahristani's longer-term production targets of 4.3 million bpd within the next four years and between 6 million and 8 million bpd by 2015. Shahristani said that Iraq's July exports hit 1.61 million barrels per day.

Sabotage and poor maintenance have left the northern exports pipelines to Turkey almost idle since 2003. On Monday, oil industry sources said that the pipelines were hit by yet another sabotage attack, leaving the southern Gulf as Iraq's only outlet for oil exports.

But Shahristani, who acknowledged problems on the line, said that the cause was not clear: "It could be a leak in the pipeline. We need a day or two to know." He said that the pipeline will be fixed in a week, but did not say when pumping will resume. "Iraq is under fierce terrorist attack. As for the northern pipeline, it is under sabotage attacks on daily basis and the employees are doing a heroic job by going out there to face the mortars," he said.

Shahristani said fields chosen from each part of Iraq will be offered to foreign companies. "Our plan is to begin in one important field from each part of Iraq, one in the north, south, west, central and Kurdistan," he said. "We would say that we have this field to develop and whoever is interested will come forward. Not all of them will come forward."

The general inspector of the Ministry of Oil has said corruption in the energy industry has cost Iraq hundreds of millions of dollars. Shahristani said a crackdown was already underway at state oil marketing company SOMO. "Those who were doubted are no longer in decision-making posts. Three of the officials are on open leave," he said.

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