U.S. Hopes for Oil Deals in Iraq
By LEON BARKHO
Associated Press Writer
BAGHDAD, Iraq (AP) -- American and British oil giants are among many Western companies looking into oil development deals in Iraq now that the U.N. Security Council is indicating a willingness to suspend its oil embargo, Oil Ministry officials said Monday.
But these companies haven't a chance at the best deals, Iraqi officials say, refusing to identify them. Agreements to explore the most abundant fields are in the works or completed with companies from France, Russia and China -- key Security Council nations Iraq considers friendly.
The Security Council has three rival proposals on the table that attempt to resume U.N. monitoring of Iraqi weapons programs. All involve suspending the 9-year-old oil embargo on Iraq as an incentive to secure Baghdad's cooperation.
There has been no arms monitoring for more than six months. The U.N. inspectors left Iraq ahead of December U.S.-British airstrikes, which were meant to punish Baghdad for an alleged lack of cooperation. Iraq has refused to let the inspectors return until sanctions are lifted.
The ''crown jewels'' of Iraq's untapped fields either are in the hands of ''our friends or are about to be given to them,'' said Abdulillah al-Tikriti, head of the ministry's economics department.
Al-Tikriti was referring to Al-Majnoon, Nahr Umar, West Qurna and Halfaya fields in southern Iraq, which have reserves estimated at 50 billion barrels and a projected production capacity of more than 2.1 million barrels a day.
Shamkhi Huwait, a consultant at the ministry, said deals on all four have been struck -- or are near completion -- with companies from Russia, France and China as a reward for the three nations' efforts to get U.N. trade sanctions on Iraq lifted.
Russia, France and China are three of the council's permanent, veto-wielding members. They generally have held closer positions to Iraq than the other two permanent members: Britain and the United States.
The deals, known in the industry as Development and Production Sharing Agreements or DPSAs, reportedly are extremely lucrative. The Iraqis have not made the details public yet.
Russia's Lukoil is tied to West Qurna, and France's Elf Aquitaine [NYSE:ELF - news] and Total are ''just waiting for the right moment'' to sign their deals for Al-Majnoon and Nahr Umar, Al-Tikriti said.
The Chinese National Petroleum Company has struck a deal to develop al-Ahdab, where reserves are estimated at a billion barrels, and is in talks on Halfaya, according to Huwait.
Iraq is not willing to grant DPSAs to companies from countries other than France, Russia and China. Those visiting Baghdad lately -- including U.S., British, Italian, Dutch, Australian, Canadian and Brazilian companies -- have been told to present offers for buy-back deals or other contracts believed to be much less profitable than DPSAs.
Baghdad diplomats, however, said Italy's Agip was in talks on the nearly three-billion-barrel Nasiriya oil field. Australia's Broken Hill Proprietary was competing with CNPC on Halfaya and Brazil's Petrobras, which discovered Iraq's largest oil field of Al-Majnoon in 1975, was testing the waters.
Canada's Ranger, they said, was interested to obtain an exploration block in Iraq's Western Desert.
But these Western firms do not fall within Iraq's category of ''friendly countries.'' Therefore, Huwait said, they stand little chance against companies from India, Malaysia, Vietnam, Algeria, Jordan and Indonesia -- nations Baghdad has pledged to grant preferential treatment for political support during the years of sanctions.
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