Iraq

Oil giants set to return to Iraq

Article published on the 2008-06-20 Latest update 2008-06-20 15:08 TU

US soldiers in Iraq
(Photo: Reuters)

Four of the biggest Western oil companies are negotiating their return to Iraq, some four decades after their assets were nationalised by then-President Saddam Hussein. Royal Dutch Shell, BP, Exxon Mobil and Total are set to sign agreements with Baghdad by the end of the month.

The deals will be Iraq's first with Western oil giants since the US-led invasion five years ago. The companies are set to secure agreements to provide technical support to the country's largest oil fields.

The Iraqi government’s stated goal is to increase oil production by half a million barrels per day by attracting modern technology and expertise to oil fields, now desperately short of both.

The one to two-year contracts, although short by industry standards, would give the companies an advantage on bidding for future contracts in Iraq. The four form part of a consortium that kept Iraq's oil reserves in foreign control for more than 40 years and have been keen to go back to Iraq, despite concerns about their security and long-term stability of the country.

At the time of the invasion, opponents claimed that the United States' main motive was to profit from the country's oil wealth.

"The oil majors would like oil production sharing agreements where they would get a share of Iraq's oil," Patrick Cockburn, an author and journalist for the British newspaper The Independent, told RFI. "The Iraqi government's interest is highly technical assistance,"

Iraqi Oil Minister Hussein Shahristani has also said Iraq will hold on to its natural resources, and that if Iraq needs help, foreign oil companies would have to cooperate with the Iraqi National Oil Company (Inoc). Inoc's technical expertise deteriorated rapidly during the UN sanctions on Iraq which preceded the invasion.

A total of 46 companies, including the leading oil companies of China, India and Russia, had memorandums of understanding with the Oil Ministry, yet were not awarded contracts.

The companies will be paid for their work, rather than offered a license to the oil deposits. The legislation has been delayed by disputes among Shia-Muslim-based, Sunni-Muslim-based and Kurdish parties over revenue-sharing and other conditions.