Iran, which is an strategic neighbor to Iraq, is among countries which are supposed to help Iraq and spokesman of the Iraqi Ministry of Petroleum has invited the Iranian companies to take part in building oil refineries in that country.
Hussein Shahristani, the Iraqi minister of petroleum, has already met with his Iranian counterpart, Seyyed Kazem Vaziri-Hamaneh to call for the establishment of working groups for development of joint fields.
At the same time, the situation of joint fields between Iran and Iraq was discussed a while ago by managing director of the National Iranian Oil Company (NIOC) who said two specialized committees are being set up to develop joint oilfields with Iraq.
Due to importance of development of the Iraqi oil industry and opportunities that it can afford Iran, we took advantage of the recent visit to Iran by a high ranking Iraqi delegation, and discussed the latest issues related to Iraq’s oil industry in an interview with economic advisor to Iraqi president. Q: Let’s begin with the new Iraqi oil act. What are its features and differences with previous laws?
A: The Iraqi oil industry is old and since no new investment has been made in its reconstruction and transfer of new technologies, Iraqi oil production is not currently the actual figure. Iraq should be producing 6 million barrels per day crude oil while it is not pumping more than 2 million barrels per day, which is one-third of its actual capacity.
On the other hand, the Iraqi government is trying to control and develop its oil industry. Therefore, we are trying to pave the way for the presence of the private sector in our oil industry. The new oil act has been drawn up in such a way as to open the Iraqi oil and gas sector to foreign investors. The law, in my opinion, is one of the best laws that has been drawn up in Iraq. The new law supports our investments in oil and gas sector and also invites major oil companies to get active in the Iraqi oil industry. Q: Is the new oil act attractive enough for international oil majors?
A: Yes. American, Japanese, British and Danish companies have announced their readiness to cooperate with the Iraqi government and invest in the oil industry and technology transfer. The new act has been compiled by an expert. Some have claimed that the act has been formulated by the Americans, but it has been compiled by Mr. Rabbani, the former Iraqi minister of petroleum, who has many years of experience in the field.
I must say that according to the new law, all investments made in the Iraqi oil industry will belong to the Iraqi Petroleum Company (IPC), which is supervising oil production and sales and signs contracts with oil companies. Q: Will you sign production sharing contracts according to the new law?
A: After the law is ratified by the parliament, the Iraqi Petroleum Company will decide about the best contract scheme for the country. At present, there are big oilfield in Iraq that are producing oil. Therefore, we have no need to share production with another company. However, we need new technologies for our oil and gas industry to boost production. We also need new contractual mechanisms for exploration and development of new fields. Q: Will you change contractual mechanism to suit exploration and development of new oilfields?
A: We will try to consider every case separately. We are not supposed to introduce a general contract format for all deals or for all countries and companies. We are producing 2.5 million barrels per day crude oil right now and we must increase it to 4 million barrels per day and this will only be possible through importing modern technologies and attracting new foreign investment. Q: Will the private sector be able to take part in investment in big oil projects of Iraq?
A: No. The Iraqi private sector is very weak and its companies and there are few companies capable of cooperating with the government in the implementation of various projects. In fact, the biggest oil company of Iraq belongs to the government and the private sector is insignificant. For this reason, the best way for development of Iraqi oil industry is attraction of the foreign private sector.
Therefore, we are seeking participation of Iran in our oil projects; especially gas projects because Iran has a lot of experience in the field. We have met with managing director of some Iranian companies for gas production near our southern border with Iran, especially Al-Amarah Province. Q: You talked about welcoming Iran’s participation in your oil industry projects. What projects have been set aside for Iran?
A: There are many big and small projects including construction of new refineries. We would need 3 billion dollars in investment in our refining industry during the next five years and Iran enjoys valuable experiences and expertise in this regard. Iraq is planning to invest in small refineries (capable of treating 10,000-20,000 barrels per day crude oil), medium refineries (capable of treating 50,000-100,000 barrels per day crude oil), and large refineries (capable of treating up to 200,000 barrels per day crude oil) to produce needed oil products because the country is currently spending about 6 billion dollars on importing such products. The refineries will be built near oilfields in Basra, Al-Nassiriya, and possibly Kirkuk and Iran can engage in those projects as well as oil production in Iraq through joint ventures. Q: What plans you are considering for gas production and supply?
A: We are pursuing those projects in cooperation with Iran. Iraq is currently burning its associated gas, which has been valued at more than 3 billion dollars per year. We do not have needed technology and structures to investment in the sector and use gas in various ways. For this reason, we need a lot of help in this sector and it has been discussed by the Iranian and Iraqi oil ministries. Such projects are very important for Iraq and constitute a big working framework in which both the Iraqi government and foreign companies should invest. Q: Have negotiations between Iran and Iraq on joint oil fields been fruitful?
A: At present, the joint oil fields are demarcated along geographical borders which have been drawn on maps and exact share of every country from joint fields has not yet been specified. Therefore, negotiations are going on. The two countries should first carry out geological studies to determine every country’s share of joint fields.
It should be noted that after the studies are over, the best way for development of such fields will be establishment of joint ventures by Iran and Iraq to produce oil and gas from the said fields. Q: So, the former Iraqi regime had done nothing to determine the specifications of joint oil fields?
A: No. after termination of war between Iran and Iraq, most investments in Iraq came to a halt and there was no communication between the two countries. However, the situation is now different and we are two neighboring and friendly countries which must establish joint ventures and embark on joint projects in the future. We also need to work toward realization of our common interests.
