For the first time in 30 years, Iraqi trade officials have invited foreign companies to bid on $3bn of gas and oil field development contracts, insisting Iraq is open for business despite the absence of a new oil law and continuing contract delays.
Iraqi oil minister Hussein Shahristani said in July that he hoped foreign investment would raise output to 4.5 million barrels per day (bpd) by 2013 from the current level of 2.5 million bpd.
Though Iraq holds 9.3% of global oil stocks after Saudi Arabia and Iran (which hold 21% and 11% respectively, according to BP’s Statistical Review of World Energy 2008), the Middle East has under-invested in downstream capacity to process crude oil and is under producing for the size of its oilfields.
Under the agreements offered in Iraq, multinational oil companies would be paid for providing training and consultancy services to Iraqi oil engineers.
But Iraq has asked international oil companies to revise proposals for technical service contracts delaying the signing of the six $500m contracts until August or September.
Assem Jihad, an oil ministry spokesman, told the Financial Times that the negotiations on the technical support agreements were continuing and that the contracts would still have to be reviewed by the ministry and sent to the cabinet for approval.
“There’s no decision yet. There could be some disagreements but all sides try to solve them,” added Mr Jihad.
Other hurdles include the failure of Iraqi political factions to agree on a new oil law to regulate foreign participation and establish fair distribution of oil revenues among the country’s main stakeholder groups.
Despite serious security concerns and gaps in the country’s business and regulatory framework, Iraq’s new National Investment Commission, launched in December last year, says it has received proposals worth tens of billions of dollars.
The commission has the power to issue licences and grant investment incentives for foreign companies in order to boost Iraq’s FDI, which was just $272m in 2006, according to United Nations statistics.
But despite interest from foreign firms, the US Department of State investment climate statement for 2007 says security continues to be the number one concern of interested businesses.
“The security situation in Iraq remains serious. Targets include convoys en-route to venues, hotels, restaurants, police stations, checkpoints, foreign diplomatic missions, international organisations and other locations with expatriate personnel,” said the report.