Iraq Opens Oil Fields To Western Developers

Iraq's oil ministry has just opened the doors to several major western oil companies. It's been more than 36 years since companies like Exxon have had access to Iraq's oil fields. And down the road, Iraq's reserves could dramatically increase the world's oil supply.

Co-host Ari Shapiro talks to Peter Zeihan, energy analyst at the geopolitical intelligence group Stratfor.

Oil Development Plans Meet With Resistance In Iraq

Iraq's Oil Ministry announced Monday that it is opening six prime oil-producing regions to long-term development by international oil companies.

The ministry also announced a hitch in negotiations on short-term agreements with five major oil companies that were scheduled to be approved next month. The two plans could bring international companies back into Iraq's oil sector for the first time since the oil industry was nationalized in the 1970s.

Iraqi opposition leaders have denounced the plans, saying they are putting the country's oil wealth into Western hands.

Oil Minister Hussain al-Sharistani said 41 foreign oil companies have already been prequalified to bid for long-term-development contracts in existing oil fields. His spokesman, Asim Jihad, said the ministry is seeking to attract experienced companies that have been reluctant to take the risk of operating because of Iraq's years of violence and instability.

"This is the first step to encourage the companies to enter the Iraqi oil sector, for work that's going to benefit the Iraqi oil industry in the long run," Jihad said.

The Oil Ministry said the deadline for bidding on work in the six oil fields is not until March of next year, with preliminary contracts to be signed next June.

There's already controversy swirling around other contract negotiations announced last week. The ministry said it was negotiating short-term deals with five major foreign oil companies: Exxon Mobil, BP, Shell, Total and Chevron.

The ministry insists that the companies would be hired only to provide technical assistance, but opponents see it as an encroachment on Iraq's national oil industry.

Maysoon Al-Damluji, a member of parliament from the Iraqi National List, said Iraq's efforts to oust foreign oil companies are an important part of national lore.

"In 1972, oil was nationalized in Iraq, and people feel very proud of these … movements to secure national wealth and national resources," she said.

Sharistani had been expected to announce that the agreements with the five oil giants would be signed. But he surprised observers by saying that nothing had been finalized, because the companies refused to offer consulting deals based on fees and instead wanted a share of the oil.

That contradicts earlier statements from the ministry, which had said the companies were being rewarded for providing free training and consulting to the National Oil Co. for the past two years.

"These companies have the experience to increase production from existing oil fields," Jihad said Sunday. "Their role will be advising us on technology. Iraqis will carry out those plans, and the companies will be paid by the Oil Ministry."

The spokesman said the goal would be to squeeze an extra 500,000 barrels of oil a day from five existing fields.

Iraqis, frustrated with gasoline shortages and rising prices, like to point out that under Saddam Hussein, there was no need for foreign help.

But Wayne Kelley, an oil analyst for RSK energy consultants in Houston, said Saddam created a pernicious myth.

"The myth is that the whole of Iraq has been basically floating on a sea of oil, and that it's very easy to get to all of it, and therefore the Iraqis don't need any assistance in developing any of this," he said.

Kelley said many of Iraq's oil fields pose challenges that will need technical expertise to overcome. He said it will take leadership on the part of the Iraqi government to convince people that sooner or later, they will need to make some kind of deal for help from experienced foreign oil companies.

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