Iraq Says May Earn 100 Times More Than Oil Companies (Update1)
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By Maher Chmaytelli and Anthony DiPaola
June 23 (Bloomberg) -- Iraq, holder of the world’s third- largest oil reserves, will earn 100 times more than international companies that develop some of its largest crude deposits, Oil Minister Hussain al-Shahristani said.
Foreign investment will raise production and profit for the country while overseas oil companies get paid a fee for developing deposits without taking stakes in Iraqi fields, al- Shahristani told parliament in Baghdad today in defense of the government’s energy policy.
“The model we chose is the one that best protects the interests of Iraq,” he said. “The companies will be given a fee because these are fields that are already discovered and producing. Iraq is free to pay them in cash or pay them in oil, priced on the day of delivery.”
Iraq is holding two licensing rounds for almost 20 oil and gas fields as it seeks foreign investors to boost output after six years of conflict and as prior sanctions destroyed infrastructure. Awards in the first round for six oil fields and two gas deposits will be announced on June 29 and June 30.
The country is set to earn $1.7 trillion over 20 years from the fields it’s seeking partners to develop, al-Shahristani said. Companies that develop the fields under service contracts will be paid about $16 billion in the period, he said.
Shahristani based his profit estimates on a theoretical oil price of $50 a barrel for production from fields in the first round. Iraq will choose the winning bids from those companies that promise to produce the most oil at the lowest price, al- Shahristani said. Bidders will have to specify output targets.
$2.6 Billion Loans
To boost the state’s cash liquidity immediately, the government will ask the winners to pay it a total of $2.6 billion in loans at the signing of their contracts, al- Shahristani said. Iraq needs cash for infrastructure including power and water plants, housing and agricultural production.
Shahristani presented the plan in parliament after lawmakers criticized the government for not boosting crude output faster and called for the licensing round to be canceled.
The round shouldn’t go ahead as lawmakers won’t have time to review the deals, Ali Hussein Balu, head of the parliamentary oil and gas committee, said by telephone today.
The Kurdish Regional Government in northern Iraq opposes the plan to grant the development contracts. The government of the semi-autonomous region said the proposed contracts “would be unconstitutional and against the economic interests of the Iraqi people,” it said in a June 21 statement on its Web site.
To contact the reporters on this story: Maher Chmaytelli in Dubai at email@example.com
; Anthony DiPaola in Dubai at firstname.lastname@example.org
Last Updated: June 23, 2009 12:43 EDT http://www.bloomberg.com/apps/news?pid=20601104&sid=aZo26J58OXE8