|Foreign companies would get majority stake in Iraq oil and gas projects
International Herald Tribune
By Rod Nordland
BAGHDAD: Iraq's new government for the first time is proposing to give foreign oil companies a majority
stake in projects to develop oil and gas fields in an effort to greatly expand production at a time of falling oil
A top adviser to Prime Minister Nuri Kamal al-Maliki on Wednesday confirmed statements made by the Iraqi
oil minister, Hussain al-Shahristani, in Vienna earlier in the day that foreign companies could bid for as much as
75 percent of the profit from new oil and natural gas development projects. The adviser also confirmed that Iraq
might offer new and existing fields for development by foreign oil companies, outside of formal bidding rounds
for new fields, which had previously been open to only a small number of major oil companies.
Previously, Iraq had offered foreign companies no more than 49 percent stakes in new oil development projects.
Shahristani told Bloomberg News in Vienna, where he was at an OPEC industry seminar, that Iraq would be
open to bids from such companies as Exxon Mobil and Royal Dutch Shell for 75 percent stakes in new
Thamir Alhadban, chief of advisers to Mr. Maliki and a former oil minister himself, confirmed Shahristani's
statement. "He has said this before — it is nothing new," Mr. Alhadban said. "Even during the old regime,
contracts were offered at 75/25." He was referring to the regime of Saddam Hussein.
But under the current government, there has been stiff opposition in Parliament among "resource nationalists"
from many political parties to foreign investment at all, let alone majority stakes. Even a proposed contract with
Shell for harvesting natural gas from oil fields in southern Iraq, which gave Shell a 49 percent share, was
strongly condemned in Parliament.
What is new now, Mr. Alhadban said, is that some existing, already producing fields would also be offered for
development under Iraq's plans to increase production. Iraq has been exempted from OPEC's freeze on oil
production because of the damage to its oil sector from the war.
Controversy over foreign involvement in the Iraqi oil industry has been one of many factors preventing the
country from passing an oil law. Mr. Maliki's oil adviser, Ibrahim Alolom, said that at a meeting in Baghdad
late last month bringing together all top government officials and the Oil Ministry, there was broad agreement
that Iraq needed to make new initiatives to attract more interest in foreign development of the petroleum
sector. "We agreed we need to open the oil sector to other paths," Mr. Alolom said, "but what those paths are
we left to be decided."
Mr. Alolom said that he was unaware of Mr. Shahristani's statements in Vienna Wednesday but that any
increase in shares beyond 51/49 would be controversial.
There is no suggestion that Iraq is proposing to offer ownership stakes in oil or gas fields to foreign companies,
which would be forbidden under the Iraqi Constitution. Rather, the stakes are for profits from projects to
develop and exploit the fields.
Sabah al-Saidi, a spokesman for the contracting and licensing division of the Iraqi Oil Ministry, denied that
there had been any change in Iraq's policy or that Mr. Shahristani was opening up bidding outside of the first
and second bidding rounds. The schedule for those rounds has been advanced by as much as six months
recently in hopes of overcoming investor reluctance attributed to instability in Iraq, the lack of an oil law and
poor terms for foreign companies.
But a statement posted on the Oil Ministry's Web site on Wednesday invited bids for digging 30 new wells in
three major southern oil fields, including the Halfaya field, which is classified as "super giant" and has five
billion barrels of proven reserves. Those bids are due in only a month and clearly fall outside of the existing bid
Because of falling oil prices, Iraq has had to sharply revise its budget downward. There is a "need for an
immediate increase of additional production," Mr. Shahristani was quoted by Bloomberg as saying. Iraq
produces 2.4 million barrels per day of oil and hopes to increase that amount to 6 million barrels over the next
five years, Mr. Shahristani has said, an effort that will require an investment of $50 billion. Efforts to reach him