Iraq Oil Grab Nears Completion: Big Oil Poised to Sign Lucrative Deals

Big Oil's big dreams are close to coming true as Iraq's Oil Ministry prepares deals for the country's largest oil fields with terms that aren't necessarily what companies were hoping for but considered a foot in the door of the world's most promising oil sector.

Iraq's proven oil reserves are only smaller than those in Saudi Arabia and Iran -- and the country is only about 30 percent explored.

Iraq produces about 2.4 million barrels per day, a recent increase from the 2 million bpd post-invasion average, but far below what its reserves could handle. Its oil sector is suffering from decades of Saddam Hussein-era mismanagement, U.N. sanctions and the effects of the current war.

The decision of how to develop a resource that provides for nearly the entire federal budget is political and controversial. To each side's alarm, the national government will rely on a Saddam-era law and Iraq's Kurdish region is signing deals on its own.

Details of negotiations between the ministry and international oil majors are being kept quiet, though media are picking up on pieces of deal-making.

MarketWatch reports executives from BP and Shell were to meet with Oil Minister Hussain al-Shahristani following Wednesday's meeting of the Organization of Petroleum Exporting Countries in Abu Dhabi. The global energy information firm Platts reports top ministry and company officials are to meet in Amman this week.

Shahristani himself dropped hints to United Press International in a recent interview. He said he's moving forward with oil deals despite the lack of a new national oil law, a draft of which has been stalled in negotiations for more than a year.

"This has nothing to do with the national oil law. There is no timeline. Whenever we finish our discussions we'll just sign the contracts," he told UPI on the sidelines of the OPEC heads of state summit last month.

"This is basically technical-support contracts," he said, adding the contracts will not be the result of a bidding process. "Selected companies will offer us technical support that we need to develop our producing fields."

Develop producing fields? "Yes, only."

With the companies who are helping to, who have been studying them, who have been doing this work? "Yes. Exactly. That's right."

How many fields? "We will not be announcing anything until we sign the contracts."

Super giants? "They are the super giants, yes."

Super giant fields are those with at least 5 billion barrels in reserves, and in Iraq include the Kirkuk, Majnoon, Rumaila North and South, West Qurna and Zubair fields. Reserves of the Nahr Umr and East Baghdad fields may also reach 5 billion barrels, and there are many large producing fields rumored to be on the negotiating table.

The world's largest oil companies are keen on entering Iraq, as their own booked reserves decline and a growing bulk of global reserves are under nationalized systems.

Oil company officials met with U.S. officials, including Vice President Dick Cheney, prior to the war and since, to discuss contracts for Iraq's oil. Former top officials of the companies were tasked by the U.S.-led occupation with advising the Oil Ministry.

"This means that it is pay-off time for the majors that have been running training courses for Oil Ministry personnel, reservoir surveys, drawn up work-plans and given general advice during the past years," said Samuel Ciszuk, Middle East energy analyst for Global Insight. "It is clever."

He said forgoing bidding allows the ministry to move quickly, as well as prove wrong critics, such as the Iraqi Kurds.

According to insiders to whom UPI talked recently as well as media reports, Shell, which produced a technical study of Kirkuk in 2005, wants a deal for the field. BP wants one for Rumaila, which it studied last year. Shell and BHP Billiton are angling for the Missan field in the south. ExxonMobil is interested in the southern Zubair field while the Sabha and Luhais fields are being targeted by Dome and Anadarko Petroleum.