Last Updated: Tue Nov 02, 2010 12:13 pm (KSA) 09:13 am (GMT)

Iraq snubs oil giants who demand share of oil

A new refinery in the city of Najaf (File)
A new refinery in the city of Najaf (File)

Iraq said on Monday that it had refused to sign deals with global oil majors hoping to cash in on the war-torn country's oilfields, as they insisted on a share of the oil.

Iraq is negotiating with Shell, BP, ExxonMobil, Chevron and Total, and a consortium of other smaller oil companies, Oil Minister Hussein al-Shahristani said at press briefing.

"We did not finalize any agreement with them because they refused to offer consultancy based on fees as they wanted a share of the oil," he said.

"The TSAs (technical support agreements) are only simple consultancy contracts to help us raise the production during the interim period" before the ministry enters into long-term contracts to develop the oil and gas fields.

The deals were to pave the way for global energy giants to return to Iraq 36 years after Saddam Hussein threw them out, and was seen as a first step to access the earth's third largest proven crude reserves.

But Shahristani said Iraq would not enter into any production-sharing contracts.

"We think there is no need to share Iraq's oil with anybody," the minister said. "The oil is for Iraqis and these are service contracts," he said.

Last week, oil ministry spokesman Asim Jihad told AFP that it would sign the support contracts on Monday and award longer-term deals to 41 other energy companies.

"We chose 35 companies of international standard, according to their finances, environment and experience, and we granted them permission to extract oil," Jihad said.

Six other state-owned oil firms from Algeria, Angola, Pakistan, Thailand, Turkey and Vietnam will also compete for extraction deals.

Iraq's wealth

Iraq wants to ramp up output by 500,000 barrels per day from the current average production of 2.5 million bpd, about equal to the amount being pumped before the U.S.-led invasion in March 2003.

Exports of 2.11 million bpd currently form the bulk of the war-torn nation's revenues, and the oil ministry is keen to raise capacity over the next five years to 4.5 million bpd.

Iraq has crude reserves estimated at about 115 billion barrels but it is sorely lacking in high-tech infrastructure following years of crippling U.N. sanctions after its 1990 invasion of Kuwait.

Shahristani said his ministry had invited tenders from 41 foreign companies to enter into long-term services agreements on six oilfields. The short-term deals are each worth about $500 million.

The companies have been told to present their offers by April 2009, he said, adding the deals would be signed later in June.

Shahristani said those companies that offered higher revenues for the ministry would be preferred in awarding the services contracts.

Historic resentment

Many Iraqis still bear a grudge after British, American and French oil companies controlled their oil industry for half a century through the Iraq Petroleum Co (IPC).

It was an era when Western majors working in the Middle East used oil output and prices as an economic and political tool, analysts said.

From the time it struck oil at the huge Kirkuk field in 1927 until nationalism forced it out in 1972, IPC -- made up of BP, Exxon, Mobil, Shell, CFP (Total) and Partex - ruled the roost.

That did not sit well with Baghdad, which resented IPC's control over its revenues.

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