Oil Companies Vie for Iraq's Oil

The widespread conviction in Iraq is that the United States invaded to seize oil.

Published: 30-Jan-2005

SAN FRANCISCO - The Iraqi government that emerges from today's election may open its oil business to foreign investment, and international petroleum companies are jockeying to curry favor with the war-torn country.

Firms from Europe and the United States are working free on certain engineering and training projects to get their feet in the door.

The companies are forging these arrangements with Iraq's Oil Ministry to help train Iraqi engineers and study ways to tap more of the country's vast oil reserves, estimated to be either the second- or third-largest in the world.

Meanwhile, Iraqi officials are drafting a law that would encourage international companies to invest in the country's tattered oil industry, run by the state since 1972. The current finance minister, a candidate in the election, announced the legislation late last month, although he offered few details.

"So I think this is very promising to the American investors and to American enterprises, certainly to oil companies," Finance Minister Adil Abd al-Mahdi said at a National Press Club conference in December.

The idea of bringing international companies and money into Iraq's oil business isn't new. In the 21 months since Saddam Hussein's ouster, the interim government and its American advisers have suggested several times opening up the country's oil industry, which is saddled with ancient equipment and sabotaged by insurgents. Still, many Iraqis bridled at the notion that the country's oil reserves should be controlled by foreigners.

The widespread conviction in the country that the United States invaded to seize oil hasn't helped.

"There is a strong belief, which should not be underestimated, that the whole purpose of the war was to gain U.S. control over Iraqi oil," said Walid Khadduri, editor of the Middle East Economic Survey, in a recent speech.

"It is going to take a good deal of persuasion and a great deal of transparency to convince a majority of public opinion that the gradual privatization of the oil industry is for the good of the people and neither a war prize nor a way for carpetbaggers to get rich quickly."

International oil companies have approached post-Hussein Iraq with caution, hunger for new supplies tempered by near-daily insurgent attacks on the country's pipelines.

The companies' ties to Iraq are growing. In the past two months, the Oil Ministry has signed a flurry of agreements to study the potential of the underdeveloped oil fields and train Iraqi engineers in the latest technology and techniques.

Royal Dutch/Shell Group, signed an agreement with the ministry Jan. 14 to study the vast Kirkuk field, estimated to hold 8.7 billion barrels of reserves. Shell also will help draft a master plan for tapping Iraq's natural gas.

Shell will do the work free as a way to strengthen its links with the ministry, said Simon Buerk, a spokesman in the firm's London headquarters.

"It's our aspiration to build a relationship with the Iraqis," he said.

BP, formerly known as British Petroleum, signed a contract this month to study the Rumailah oil field near Basra.

ExxonMobil Corp. signed a memorandum of cooperation last fall, laying groundwork to provide the ministry with technical assistance and conduct joint studies.

An Iraqi-Turkish consortium won a contract in late December to help develop the Khurmala Dome oil field.

ChevronTexaco has been flying Iraqi oil engineers to the United States for training since last year. It describes the program as a goodwill gesture.

"We made it clear there will be no quid pro quo," said Don Campbell, a spokesman.

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