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Iraq opens door to foreign bidding to increase oil output

Exxon Mobil, Chevron, and Shell are among the prequalified companies vying for contracts.

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To be developed are the aging fields of Rumaila, Maysan, West Qurnah Phase 1, and Zubair in the south; Bai Hassan and Kirkuk in the north; as well as the two gas fields of Akkas and Mansuriyah, said Mr. Shahristani.

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He said that there were 120 applicants for the contracts. The ministry will hold a conference in London in September to announce the start of the tender process, which will last until March 2009. The minister expected agreements to be signed by June of next year.

Shahristani stressed that a key criterion for winning the bid was willingness to maintain a staffed office and presence in Baghdad. So far, most foreign investors have been shying away from operating in Iraq because of security concerns.

"The security situation is improving and from now until these agreements come into effect in 2009, Iraqi forces will be able to provide adequate protection," said Shahristani.

Issam Chalabi, a veteran of Iraq's oil industry who served as minister from 1987 to 1990 during Saddam Hussein's rule and lives in Jordan, expressed concern and bewilderment at Iraq's decision to announce development and service deals with foreign companies for some of the country's oldest oil fields.

"We used to produce from these oil fields 4 million b.p.d in 1979 and 3.5 million b.p.d in 1990," says Mr. Chalabi, who says he is not opposed to foreign involvement in Iraq's oil industry.

He says a big question mark surrounds the technical support and service contracts that the government is negotiating separately with the big US, French, and British firms, which will also take part in the future bidding.

"They will be already in possession of the details and they would have studied the situation. There is no fairness," he says.

Shahristani was angered when prodded by reporters for details on the contracts.

He said negotiations are ongoing and no contracts have been signed yet adding that "time is running out."

He explained that the only reason Iraq wanted to rush with these noncompetitive service contracts is to be able to boost production right away to take advantage of surging oil prices that have surpassed $140 a barrel.

"These contracts will not interfere in any way with the licensing round and there will be no preference for any company … except via the competitive process we are speaking about now. The two issues are separate," he said.

Abdul-Mahdi al-Ameedi, an Oil Ministry official, said later that differences over "financial and contractual terms" were holding up these six short-term contracts. He refused to elaborate further.