Iraq Oil Report

The long-suffering bill that would govern Iraq’s oil industry and divvy up oil wealth has been stalled more than a year, bogged down in political squabbling and symbolic of problems rippling below the surface here despite success on the security front.

Just last year, U.S. and Iraqi officials repeatedly announced that passage of the oil bill was imminent. The bill was seen as crucial to laying the groundwork for long-term security and political reconciliation in Iraq, since it would guarantee equal distribution of the oil profits on which Iraq’s economy depends.

Now, the topic rarely comes up, and when it does, it is in a far more sober context, Tina Sussman writes for The Los Angeles Times.

Oil supplies meet and may slightly exceed current world demand, Iraqi oil minister Hussain al-Shahristani said at a press conference in Poland.

Sharhristani did not say whether or not the supply situation meant OPEC needed to cut output at its September meeting, saying the group would have to first review its market data, Reuters reported.

Sharhristani also said he expected Iraq’s OPEC target to reach 4.5 million barrels per day within five years and 6 million barrels per day within 10 years.

In the last few decades the Iraqi oil industry has been mismanaged and has suffered many problems, thereby losing out on many opportunities. This unfortunate situation continues to be the case for this industry. During the past two years, the present Iraqi Ministry of Oil has not had any effective policy to improve the severely bad conditions of its oil industry. Iraqi oil production remains low, and it is only due to improved security in the north of Iraq that oil is once again flowing in Kirkuk and being transported to Turkey, bringing Iraqi oil production to 2.5 million barrels per day, writes Ali Hussain writes for the Middle East Economic Survey.

Political gridlock has overtaken security risk as the primary hurdle facing the rehabilitation of Iraq’s oil industry, according to oil executives and analysts.

Cabinet disagreements and unrealistic expectations from Baghdad are already threatening to scupper the oil ministry’s plans to sign short-term technical support agreements with international oil companies.

This could also complicate the more ambitious plans to agree longer-term development contracts that would involve big investments by oil majors, Carola Hoyos, Roula Khalaf and Ed Crooks report for The Financial Times.

Negotiations between Iraq and major international oil companies over deals to boost output are still under way and have not stalled, a senior Iraqi oil official said.

Last Sunday, a U.S. diplomat said talks to sign no-bid and short-term contracts had broken down and the Iraqi government was likely to abandon them, the AP reported.

Royal Dutch Shell Plc said it was still in talks with Iraq about a short-term service contract to help boost oil production, despite a U.S. diplomat in Baghdad suggesting such deals may be dropped, says Reuters.

“Negotiations go on,” a Shell spokesman said, but he declined to give further details.

Iraq and China will sign a deal next week to develop the Ahdab oil field, restoring an agreement that was canceled after the 2003 U.S.-led invasion and is worth US$1.2 billion, an Iraqi spokesman said.

The governor of Wasit province, where the billion-barrel field is located, left Wednesday for China to join Iraqi Oil Minister Hussain al-Shahristani at the ceremony in the next few days, provincial spokesman Majid al-Atabi said.

“The governor will discuss the logistic cooperation with the Chinese company, especially the security side,” al-Atabi told The Associated Press.

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