Iraq oil contracts due at end of month

Iraq will award contracts at the end of this month for oilfield developments that could boost the country's crude output by two thirds, its oil minister has confirmed. "When these oilfields are developed, Iraq's oil production will increase from about 2.4 million barrels per day (bpd) currently to more than 4 million bpd," Dr Hussain al Shahristani said in Baghdad yesterday. The selection of foreign oil companies to develop six of Iraq's biggest oilfields and two gasfields would be conducted on June 29 and 30 "in all transparency, and we are inviting the media to attend the ceremony", Dr al Shahristani said. The minister's comments followed rumours that Iraq's landmark first bidding round for oil licences might be cancelled because he has been summoned before the country's parliament for questioning. Dr al Shahristani's critics in parliament say his policies have failed to halt production declines from Iraq's main southern oilfields at a time when the country desperately needs revenue for reconstruction projects. The fields on offer in the bidding round contain oil and gas worth US$1.3 trillion (Dh4.77tn), based on a crude price of $40 a barrel, Dr al Shahristani said. The fee-based technical services contracts for development will be awarded for 20-year terms but Baghdad is aiming for an initial output boost to 4 million bpd of crude production nationwide by 2012. In March, Dr al Shahristani said a second oil licensing round should help push output to 6 million bpd by 2015. Iraq's two current bidding rounds, for oilfields containing more than 80 billion barrels of reserves, are the mainstay of his plan to lift oil output. Iraq has the world's third-biggest crude reserves, estimated at 115 billion barrels. At the same time, its semi-autonomous Kurdish region has been trying to develop oil production from new discoveries, and its regional government has signed production sharing contracts with more than a score of small and medium-sized foreign oil producers. But Baghdad has sought to block the agreements. The first Kurdish oil exports started flowing on June 1 after the two governments appeared to reach a compromise, but the federal oil ministry would not drop its opposition to the Kurdish oil deals yesterday, extending uncertainties over how the companies producing the oil will be paid. "These contracts need to be ratified by the Iraqi federal oil ministry. Till that time they are illegal," Ali al Dabbagh, a government spokesmen, said yesterday. Dr al Shahristani called the start of oil exports from Kurdistan a "positive step", but said they were "still not completely legal". He said he hoped the long-awaited passage of a new federal oil law for Iraq would allow the Kurdish oil deals to receive federal approval. The proposed oil law, drafted by Dr al Shahristani and his staff, has been stalled in the Iraqi parliament since 2007 by arguments over revenue sharing and jurisdiction of resources. [e-mail]