[MIDDLE EAST] Negotiations under way for no-bid contracts. Oil majors may return to Iraq after 36 years

Four Western oil companies are in the final stages of negotiations this month on contracts that will return them to Iraq, 36 years after losing their oil concession to nationalization as Saddam Hussein consolidated his power.

Exxon Mobil, Shell, Total and BP, the original partners in the Iraq Petroleum Co., along with Chevron and a number of smaller oil companies, are in talks with Iraq's Oil Ministry for no-bid contracts to service Iraq's largest fields, according to ministry officials, oil company officials and a U.S. diplomat.

The deals, expected to be announced on June 30, lay the foundation for the first commercial work for the major companies in Iraq since the U.S. invasion, and open a new and potentially lucrative country for their operations.

The no-bid contracts are unusual for the industry, and the offers prevailed over others by more than 40 companies, including companies in Russia, China and India. The contracts, which would run for one to two years and are relatively small by industry standards, would nonetheless give the companies an advantage in bidding on future contracts in a country that many experts consider to be the best hope for a large-scale increase in oil production.

There was suspicion among many in the Arab world and among parts of the American public that the United States had gone to war in Iraq precisely to secure the oil wealth these contracts seek to extract. The Bush administration has said that the war was necessary to combat terrorism. It is not clear what role the United States played in awarding the contracts; there are still American advisers to Iraq's Oil Ministry.

For an industry being frozen out of new ventures in the world's dominant oil-producing countries, from Russia to Venezuela, Iraq offers a rare and prized opportunity.

While enriched by escalating prices, the oil majors are also struggling to replace their reserves as more of the world's oil patch becomes off limits.

The Iraqi government's stated goal in inviting back the major companies is to increase oil production by half a million barrels per day by attracting modern technology and expertise to oil fields now desperately short of both. The revenue would be used for reconstruction, although the Iraqi government has had trouble spending the oil revenues it now has, in part because of bureaucratic inefficiency.

The Iraqi Oil Ministry, through a spokesman, said the no-bid contracts were a stopgap measure to bring modern skills into the fields while the oil law was pending in Parliament.

Source: The New York Times|By ANDREW E. KRAMER

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