Iraqi minister defends oil deals

Iraq's oil minister has defended his plan to award long-term service contracts to foreign firms for the fields that pump most of the country's crude, saying Iraq urgently needs to boost output. "We have started to develop the oil-producing fields because it is faster and Iraq is in extreme need to increase its production," Dr Hussein al Shahristani told the country's parliament. "The undiscovered fields need time for drilling." He also said Iraq would earn 100 times more than the foreign companies it planned to hire, and that the country was due to earn US$1.7 billion (Dh5.37bn) over 20 years from the fields for which it was seeking development partners. The Iraqi government, led by the prime minister, Nouri al Maliki, has affirmed its plan to award the contracts later this month, despite protests from parliamentarians, the regional government of Iraqi Kurdistan and engineers at South Oil Company, the largest of Iraq's three state-owned oil companies. Dr al Shahristani was summoned before parliament yesterday to answer questions about the proposed contracts, to be awarded next week after Iraq's first post-war bidding round for oil licences. A group of parliamentarians has threatened to block the deals. The minister is not without supporters over the issue. Ayad al Samarraie, the parliamentary speaker, said Iraq's two current bidding rounds for oil and gas development rights should go ahead, even if members of parliament did not agree with the ministry on contractual terms. "We need the current fields to be developed through Iraqi effort while using foreign expertise by service contracts," he said. But Ali Balou, the Kurdish politician who heads the parliamentary oil and gas committee, said he would "totally reject" the eight long-term contracts to be awarded on June 29 and June 30 unless they had been approved by parliament. "We will not allow the oil ministry to move ahead, ignoring parliament and signing contracts, since they are illegal and unconstitutional," he said. The Kurdistan regional government said Baghdad's policy was "against the economic interests of the people of Iraq". The Kurdish government, which has been at loggerheads with Iraq's central government over how foreign oil companies operating in Iraq should get paid, said semiautonomous Kurdistan had made "clear progress" in a short time on increasing Iraqi oil production and revenues by focusing on exploration, not existing production, in a way that "best encourages investment". Many of Dr Shahristani's critics, including the Kurds, have argued that the minister's nationalistic approach to oil development would discourage investment. Conversely, a group led by the South Oil Company's director general wants foreign participation in projects to boost output from Iraq's producing field to be restricted to short-term contracts. Dr Shahristani said his plan called for Iraq to auction oil exploration prospects in the future. "If we keep working on our existing fields without digging anew and putting in more effort, production will decrease," he said. Iraq's current output of 2.45 million barrels per day (bpd) from proved reserves of 115 million - the third largest in the world - is below the peak level of more than 2.6 million bpd reached before the US-led invasion in 2003. [e-mail]