Western Firms May Win No-Bid Contracts in Iraq

Four large Western oil companies are close to securing no-bid oil contracts in Iraq. If the deals are confirmed, Exxon Mobil, Shell, Total and BP would return to operations in Iraq for the first time in 36 years. Melissa Block talks to New York Times journalist Andrew Kramer.

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MELISSA BLOCK, host:

A handful of Western companies will soon have a stake in Iraq's potentially lucrative oil industry. The New York Times reports today that Exxon Mobil, Shell, Total and BP, among others, are in final talks with Iraq's Oil Ministry to receive no bid contracts. The companies would service some of Iraq's largest oil fields, and these deals could open the door for larger contracts in the future.

Andrew Kramer reported the story for the Times; he joins us from Baghdad. And Andrew, explain, please, how much these contracts are worth and what they're for exactly?

Mr. ANDREW KRAMER (New York Times): Well, the contracts are not particularly valuable and they are small by industry standards. The companies in the Iraqi Oil Ministry didn't actually disclose the monetary value of the contracts. What they are is for advice to the Oil Ministry and for training for Iraqi engineers. So the companies would invite Iraqi engineers to leave Iraq for training. There is a possibility that some Western engineers would come into the country to inspect the fields and perform work.

BLOCK: While the contracts might not be lucrative now, the idea is that these could provide what's called a foothold for these companies in the future, in terms of developing new oil fields.

Mr. KRAMER: That's right. They have a formal clause that would allow the holders of the contracts now to renew them at least in part by matching the bid of a future competitor. This is a potentially very valuable foothold into Iraq. This also benefits for the companies to have access to the geological data on the fields, which they'll receive while working on these contracts.

BLOCK: And the notion that these were no-bid contracts, how's that been explained to you?

Mr. KRAMER: The military says that the companies that were awarded these contracts, or the companies that there are negotiations with now, rather, had been providing free services on almost a charitable basis to the ministry for the past two years, and at these contracts are a continuation of this earlier charitable work in Iraq.

BLOCK: How is that explanation going over with oil companies from other countries who probably would want to a big stake in these contracts too? Countries like China and Russia and India.

Mr. KRAMER: I don't think it will go over well. While the ministry hasn't formally announced the contracts yet, I would expect there would be some objection from companies. At this time, with oil prices at $140 per barrel and companies being excluded from most other oil-producing regions such as Russia or Venezuela, these would be highly coveted contracts.

BLOCK: What's your understanding of what role, if any, the U.S. government played in working out who would get these contracts?

Mr. KRAMER: There's been suspicion, of course, in the Arab world and also in America that the war was motivated in part by a desire to gain access to Iraq's oil resources. It's not exactly clear what role they played in awarding these contracts. There are still American advisers in the Iraqi Oil Ministry, that when I talked to the chief economic adviser at the embassy here in Baghdad, he said that the ministry really had approached the United States, not necessarily the United States government but the Western companies, for advise on how to get the technology in, and this was their primary interest.

BLOCK: Are you hearing anybody talking about the notion that U.S. influence was brought to bear hear and that's how these no-bid contracts are being awarded?

Mr. KRAMER: I think that it's understood in the business that the U.S. approach to petroleum investment, in other words, an openness to having international companies gain access to fields, which is also (unintelligible) in the United States but not in most of the oil producing world, I think it's understood that this idea has been, if not in imposed, at least encouraged upon the Iraqi government.

BLOCK: And give a sense, Andrew, when - if and when Iraq's oil reserves are developed, the untapped fields now, how lucrative a market is that?

Mr. KRAMER: It's considered one of the most respected markets in the world. The potential is larger in Iraq than almost anywhere else. They produce about 2.5 million barrels a day now, are expected to go up to about four million barrels once the old fields are repaired, and it could potentially produce six million barrels per day.

BLOCK: And again, the companies better in place with these no-bid service contracts now would be in a pretty good position, possibly, for getting those larger contracts somewhere down the line.

Mr. KRAMER: That's actually the state goal of the companies. They say these are not lucrative contracts now, but they are keenly interested in working on Iraq down the line.

BLOCK: Andrew Kramer, thanks very much.

Mr. KRAMER: Thank you.

BLOCK: That's New York Times reporter Andrew Kramer in Baghdad.

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