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Iraq lawmakers to question oil minister over deals

Source: Reuters - Thu 18th Jun 2009

Iraq's parliament has called on the oil minister to answer questions about government plans to auction off service contracts in prized oil fields to foreign companies at the end of June, a lawmaker said on Tuesday.

Oil Minister Hussain al-Shahristani and senior executives from Iraq's South Oil Co and the Iraq Drilling Company will appear before the legislative chamber next Tuesday, said Shatha al-Musawi, a lawmaker with the ruling Shi'ite alliance.

Musawi said oil experts had described the first round of fixed-fee service contracts, due to be handed out on June 29-30, as a waste of Iraqi money because they involved oil fields in which Iraq had been investing heavily since the 2003 U.S. invasion.

"They said Iraq so far had spent around $8 billion (4.9 billion pounds) to rehabilitate these fields... and they said it is not reasonable after all this money and all the development undertaken that foreign companies should take these fields and share Iraq's production" she said.

"For this reason, parliament decided to host the oil minister and those oil experts in a special session and to hear from all of them" Musawi added.

Among the other executives expected to testify are South Oil Co. head Fayad al-Nema and Iraq Drilling Company head Idrees al-Yassiri.

The parliamentary summons came after Nema, whose unit produces the bulk of Iraq's 2.3-2.4 million barrels per day of crude, told Reuters he objected to the first round of contracts and had called on Shahristani to cancel the bidding round.

The deals represent Iraq's first big push in three decades for foreign investment in its oil fields, which hold the world's third-largest crude reserves.

Semi-autonomous Kurdish authorities in the north of Iraq have signed development deals with around 30 private companies, but Baghdad considers those illegal.


The first round of service contracts involve older oil fields, most classed as "super giants" with 5 billion barrels or more of reserves, which are already producing. Musawi said they account for some 80 percent of current national output.

A second round of tenders, the results of which are expected at the end of the year, involve undeveloped oil fields.

Musawi said the experts told parliament they did not object to the second round of contracts for foreign oil companies. Nema said the same in his interview with Reuters.

The summons by parliament was not linked to separate moves by members of parliament's oil and gas committee to quiz Shahristani over the oil ministry's inability, to date, to restore oil output to the level it was at before the invasion.

Musawi said lawmakers wanted Shahristani to explain the benefits of the first round of contracts. They also wanted a clarification about the nature of the deals, which she said looked more like production sharing agreements than pure fixed-fee service contracts.

Ali Hussain Balou, a Kurdish lawmaker and head of the oil and gas committee, said the chamber had the power to "hinder, cancel or suspend" any laws written by the government.

It could therefore, in his view, stop the awarding of service contracts in oil fields.

Would it?

"Yes, it is expected" Balou said.

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