Iraqi government opens 6 oil fields to bidding; no announced deals with big oil companies

The potential participation of big Western companies like BP, Chevron, Exxon Mobil, Shell and Total SA in Iraq's oil industry has been criticized in recent weeks following published reports that several were close to signing no-bid contracts with the Iraqi government.

Those contracts were expected to be announced Monday, but Iraqi Oil Minister Hussain al-Shahristani instead named 35 companies that would be qualified to bid on service contracts for the oil fields of Rumeila, Zubair, Qurna West, Maysan, Kirkuk and Bay Hassan.

"These fields were chosen because their production can be raised in a short time and at a low cost," said al-Shahristani.

All of the fields are currently producing oil, and al-Shahristani said the new contracts would raise Iraq's production by 1.5 million barrels per day. Iraq currently produces 2.5 million barrels per day and hopes to raise that to 4.5 million by 2013.

Greater oil production is key to rebuilding Iraq's devastated infrastructure and delivering energy to the country.

But the lack of security and the absence of a new legislation to manage the industry have hampered development of the oil industry.

A reduction in violence in recent months has allowed the country to boost production to its highest level since the U.S.-led invasion in 2003.

At the same time, record oil prices that surpassed $143 per barrel Monday have made Iraq's vast untapped reserves even more tempting to foreign companies. Iraq has an estimated 115 billion barrels of oil reserves and some 112 trillion cubic feet of natural gas, according to the government.

Al-Shahristani said Monday that the country would also open up the natural gas fields of Akkaz and Mansouriyah for bidding.

The deadline for the oil and gas bids is the end of March, and preliminary contracts will be signed next June. Every company involved in the bidding process must have an Iraqi partner and must give 25 percent of the value of the contract to Iraqi companies, said al-Shahristani.

Western participation in Iraq's oil industry, especially by American companies, has been a contentious issue ever since U.S.-led forces toppled the regime of Saddam Hussein. Many Arabs believe the U.S. went to war to seize Iraq's oil. That has been repeatedly denied by Washington.

Those concerns were reignited two weeks ago after a report in the New York Times said Royal Dutch Shell PLC, BP PLC, Exxon Mobil Corp., Chevron Corp. and French energy giant Total SA were close to signing short-term oil service contracts with Iraq on a no-bid basis.

The deals, which were expected to be announced Monday, were reportedly designed as an interim way to boost Iraq's oil output until the country could agree on a new national oil law stalled by political squabbles between the central government and the Kurds.

On Monday the Times also reported that a small U.S. State Department team helped draw up contracts between the Oil Ministry and the five major oil companies. The newspaper quoted a senior State Department official as saying the team provided technical support to an understaffed Iraqi ministry.

Iraqi government spokesman Ali al-Dabbagh denied the country had ever considered a no-bid process, saying "there was never any intention to award the contracts without a tender."

Al-Dabbagh denied American influence on the Iraqi government's oil decisions, saying "politics does not come into this."

"There is no preferential treatment for anyone, no matter who," said al-Dabbagh.

Copyright 2008 The Associated Press. All rights reserved. This material may not be published, broadcast, rewritten or redistributed.