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Correction to This Article
The article incorrectly said that the New York Times had reported that U.S. advisers in Iraq influenced the selection of Western oil companies for service contracts. The Times article said the advisers "played an integral part" in drawing up the contracts but cited the advisers and another official saying they were not involved in choosing the companies.

Iraq Opens Oil Fields To Global Bidding

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By Sudarsan Raghavan and Steven Mufson
Washington Post Foreign Service
Tuesday, July 1, 2008

BAGHDAD, June 30 -- Iraq's government invited foreign firms Monday to help boost the production of the country's major oil fields, beginning a global competition for access to the world's third-largest reserves.

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Iraqi Oil Minister Hussain al-Shahristani said the government would seek to tap Western technology and capital to increase Iraqi oil production by about 60 percent, or approximately 1.5 million barrels a day, swelling Iraqi oil revenue and potentially easing tight petroleum markets where prices have doubled in the past year.

Shahristani said 35 companies -- including firms from the United States, Britain, France, Russia, China and India -- had been selected to bid on long-term contracts to provide services, equipment, training and advice on the country's biggest oil fields, which have suffered from age, technological neglect and mismanagement during years of war and economic sanctions.

"The six oil fields that have been announced today are the backbone of Iraq's oil production, and some of them are getting old and production is declining," Shahristani told reporters.

The invitation marked another step toward giving Western companies a significant role in Iraq's oil industry, which the Baathist government nationalized in 1972. But the opening is likely to cause controversy in a nation wary of Western influence over its largest source of wealth and among foreign critics who say the Bush administration wanted to depose Saddam Hussein to gain greater access to Iraqi oil.

Followers of Shiite cleric Moqtada al-Sadr, who opposes Western firms having any control over Iraq's oil, voiced suspicion. "Those agreements should be open and transparent," said Liwaa Smaism, a senior Sadrist lawmaker. "We do not know whether those contracts are ordinary technical contracts with foreign companies, or are they involved in the excavation and production of the oil?"

Other lawmakers said any deals should be made after parliament approves legislation governing Iraq's oil resources. "I do not believe that the companies should sign contracts in such a fragile political situation and confusing security situation," said Mohammed al-Daini, a Sunni lawmaker.

Daini added that "America has come over here to Iraq in order to first control the oil wealth and, second, the entire economical wealth." He said he and other lawmakers should review the contracts to ensure they don't allow Western firms to infringe on Iraq's sovereignty.

Oil experts and companies cautioned that Iraq's government must still approve a hydrocarbon law that would clarify revenue-sharing between Iraq's central and regional governments, the role of the Iraqi national oil company and the framework for paying foreign firms. In addition, foreign firms remain concerned about security.

"How this is going to be done is an open question, and I don't think anyone in the oil industry expects that's going to be resolved anytime soon," said an oil company official who spoke on the condition of anonymity because his company is in the midst of negotiations with Iraq.

Separately, the Iraqi government is finalizing at least five short-term no-bid service contracts with major U.S. and European companies. Iraqi Oil Ministry officials said Monday that the firms were selected because most had extensive experience in Iraq's oil industry before nationalization. The precursors of Exxon Mobil, Royal Dutch Shell, BP and Total were part of the Iraq Petroleum Co., which ran Iraq's oil industry for half a century. BP has information dating to the 1920s on Iraq's oil reservoirs.

"They have geographical studies and other analyses," said Asim Jehad, an Oil Ministry spokesman. "They can advise us, supply us with what we need and bring new technology." Chevron was also among the companies selected for the short-term contracts.


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