Global Policy Forum

By Saeed Shah and Alex Brett

The world's oil majors will descend on two key conferences about Iraqi oil next month, seizing their last chance to jockey for position before the expected passing of the country's hydrocarbon law sets off a scramble for its vast energy resources.

Iraqi officials, including oil minister Hussein Shahristani, will attend the gatherings in Dubai in September to meet international oil executives. All the big players will be there, including BP, Shell, Exxon and Chevron, as well as minnows such as Addax Petroleum, some of which have operations in Iraq. David Horgan, managing director of Petrel Resources, an Irish explorer with a presence in Iraq since 1999, said: 'All the oil companies have been salivating at the prospect of Iraq for years. There is a good chance of very large discoveries. Nowhere else in the world offers that.' Horgan said that once the oil law was passed, oil executives would rush to sign exploration and production deals, despite Iraq's security situation. Under severe US pressure, the Iraqi administration is now expected to push through the oil law before the end of September.

The majors have stayed away from Iraq, which has the world's third largest oil reserves, because there was no legal framework for investing in its energy sector. Unusually for the Middle East, the oil law will provide generous rates of return and production sharing agreements that allow companies that have had to write down their reserves, such as Shell, to book massive new reserves. Muhammad-Ali Zainy, from the Centre for Global Energy Studies in London, said: 'Why do international oil companies rush in to divide the loot at a time when Iraq is submerged in blood? Iraqis will not benefit from this.' Iraq has discovered reserves of 115bn barrels, of which only 40bn barrels have been developed. There are large parts of the country that remain unexplored.

Separately, Russia has lobbied successfully to set up an energy cartel which it hopes will rival Opec. At the Shanghai Co-operation Organisation Summit in Bishkek, Kyrgyzstan, leaders of Central Asian countries, China and Russia last week agreed to create a 'unified energy market' in the region that is home to some of the biggest producers of oil and gas.

Iran's President Mahmoud Ahmadinejad made clear at the conference that Tehran was prepared to join the club, which would see the world's first, second and fourth largest gas producers form a powerful bloc, potentially ranged against Western interests. Christopher Langton, an analyst at the International Institute for Strategic Studies, said: 'Russia is seeking to have an organisation tilt the competition in its favour.' The move coincides with the apparent decline of US influence in the region, where both the Trans-Caspian pipeline project and the diversion of Turkmen gas via Russia to Europe have stalled. Ariel Cohen, a regional expert at the Heritage Foundation in Washington, said: 'The resource control in Russia's hands will benefit President Putin tremendously'.