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Iraq urges oil companies to honor contracts

Iraq urges oil companies to honor contracts

Iraq's oil minister urged international oil companies to move swiftly with implementing their newly-awarded contracts in the country, while assuring them Sunday they have the government's full support in dealing with any obstacles.
Hussain al-Shahristani's call reflects the pressure Iraq faces as it struggles to rebuild following the U.S.-led 2003 invasion that toppled Saddam Hussein. Years of sanctions on the country, home to the world's third largest proven reserves of crude, ravaged its oil industry. Looting, sabotage and perennial security woes following the war battered the sector even more and stunted investor interest.
Developing the 11 fields awarded during the two licensing rounds last year is "the nation's highest priority," al-Shahristani told representatives of the companies.
The oil executives and representatives from various Iraqi ministries had gathered to outline the challenges the companies face, and to ensure that Baghdad gives them all the help they need to meet their targets.
"You have to prove to us, and to the world, your ... ability to implement these contracts in accordance with the timeframe and the conditions" stipulated in the deals, al-Shahristani said, adding that the contracts were awarded transparently and through competitive bidding.
"Success is not only reaching the production targets, but reaching these targets at a lesser cost, as much as possible," he said. "I hope we work together to reduce the costs."
The companies are seen investing between $150 billion and $200 billion over the course of the 20-year service contracts they were awarded.
The bidding rounds were the first Baghdad has held in decades, and were seen as opening a new era for Iraqi oil. The country relies on crude sales for more than 90 percent of its state revenue, but has been unable to produce more than roughly 2.5 million barrels per day, on average, for years.
Al-Shahristani has said Iraq hopes to boost output to 12 million barrels per day in about six years with the new contracts _ a level that would put it just shy of OPEC kingpin Saudi Arabia's current production capacity. But analysts and others say such targets are too optimistic.
Salah Baker, a Scotland-based Iraqi oil expert, told The Associated Press recently that 6 million barrels per day within the next five years was a more realistic goal.
The courting of international firms was aimed at bringing in companies with deep pockets and ample experience. But concerns about security _ which has improved dramatically since the height of the insurgency in 2006 _ still cast a shadow on development plans, as does Iraq's inability to form a new government, four months after no clear victor emerged from the March 7 elections.
The companies _ which get a fixed price per barrel they produce _ also face a host of other challenges, both logistical and bureaucratic.
"What concerns us is the lack of infrastructure," said an executive with one of the companies, speaking on condition of anonymity because he was not authorized to speak on behalf of his company. "We're afraid that we reach a point when we can't handle the oil and gas we produce."
The Iraqis are working hard to build develop the necessary infrastructure, "but they need to be fast," he said.
A representative from another international firm said officials need to streamline logistics if the development deadlines are to be met.
"The most important issue to us is to get a visa. It's like a lottery," he said, adding that it sometimes takes 40 days to get the visa. He also said they've run into delays getting materials to the site.
Iraqi officials acknowledge that the obstacles are many, but pledged that they will work hard to ensure that they meet their obligations. Al-Shahristani stressed that security at the sites was the government's responsibility
Thamer al-Ghadhban, an energy adviser to Prime Minister Nouri al-Maliki, said while virtually everything needed for the projects would have to be imported, Iraq was committed to clearing the path for the companies to operate.
Al-Ghadbhan cautioned the companies, however, that they also need to ensure that their work brings benefits to the regions in which they would be working.
"The local communities have expectations which I advise the (companies) to take into consideration," he said.


Updated : 2021-03-04 23:50 GMT+08:00