Processing Magazine

Iraq appeals to oil companies for investment

December 8, 2008

The Iraqi oil minister said his country is now safe for business and desperately needs help in rebuilding its devastated oil infrastructure, as reported by the Associated Press. Billions of dollars are needed for investments in the coming years, he told reporters at the three-day energy conference held recently in Baghdad. He appealed for help from the international companies. In return, he promised "full cooperation and a transparent and competitive environment for fair business." A drop in oil prices to under $50 per barrel from a summer time high of $150 has hit Iraq hard since the OPEC country is heavily dependent on oil revenues for more than 90 percent of its budget. The Iraqis recently opened the first round of bidding since the 2003 invasion for new oil contracts to develop six major oil fields and two gas fields, choosing 34 of 120 oil companies that applied to participate. Those chosen included world giants Royal Dutch Shell PLC, BP PLC, ExxonMobil Corp., Chevron Corp. and Total. None of those major companies was among the dozens of groups manning booths at the Baghdad conference, although the third-largest U.S. oil company ConocoPhillips was there, along with several Japanese and Russian companies. Several private security companies also advertised their services at booths, underscoring the continued dangers of doing business in Iraq. Other companies, including Lukoil and Gazprom Neft of Russia and Indonesia''s Pertamina, are looking to renew ties they enjoyed under Saddam Hussein''s regime. China recently signed a $3 billion deal to develop the Ahdab oil field south of Baghdad, restoring a Saddam-era contract that had been canceled after the invasion. Iraq sits on the world''s third-largest proven oil reserves with more than 115 billion barrels. But decades of wars, U.N. sanctions and aging infrastructure have depleted the oil infrastructure, while insurgent attacks and sabotage have undermined rebuilding efforts since the March 2003 U.S.-led invasion. Many desert areas in western and southern Iraq also have yet to be explored, raising the potential of undiscovered resources. The minister said no field exploration work has been conducted in Iraq since 1990, when the U.N. imposed punishing sanctions following Saddam''s invasion of Kuwait, which led to the 1991 Gulf War. Iraq hopes to triple the current daily production of 2.4 million barrels per day to 6 million barrels per day in 2018. The inability of Iraq''s fractured ethnic and sectarian groups to push through national oil legislation governing the equitable distribution of oil revenues also has been another major frustration for companies looking to invest in Iraq. Most of Iraq''s known oil wealth is concentrated in the northern semiautonomous Kurdish region or the mainly Shiite south. The Kurds have unilaterally signed more than 20 production-sharing contracts with a handful of international oil companies -- a move that has drawn warnings from the central government that the contracts are considered illegal.