Oil Companies Look to the Future in Iraq

Oil Companies Look to the Future in Iraq

By TIMOTHY WILLIAMS
Published: November 30, 2009

BAGHDAD — More than six and a half years after the United States-led invasion here that many believed was about oil, the major oil companies are finally gaining access to Iraq’s petroleum reserves. But they are doing so at far less advantageous terms than they once envisioned.

The companies seem to have calculated that it is worth their while to accept deals with limited profit opportunities now, in order to cash in on more lucrative development deals in the future, oil industry analysts say.
“The attraction of these fields to oil companies is not the per-barrel profit, which is very low, but their value as an entrance ticket to the oil sector of southern Iraq,” said Reidar Visser, a research fellow at the Norwegian Institute of International Affairs who operates an Iraq Web site, Historiae. “In terms of size and potential, the Basra region remains one of the most attractive areas of future growth for the international oil industry.”

Iraq’s first stab at opening its oil industry to foreign investment ended in disappointment at an auction in June in which most companies declined to bid. But last month many of those same companies — including Exxon Mobil and Occidental Petroleum, the first American companies to reach production agreements with Baghdad since the 2003 invasion — signed deals at much the same terms they rejected over the summer.

Analysts say the deals on three of the country’s top fields show that Iraq, after an embarrassing start, may be on a path to joining the world’s major oil-producing nations, which could in turn upset the equilibrium in OPEC and increase tensions with the neighboring oil giants Iran and Saudi Arabia. Adding to those strains, development rights to 10 other Iraqi oil fields will be offered to foreign companies at a public auction in Baghdad on Dec. 11.

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http://www.nytimes.com/2009/12/01/world/middleeast/01iraqoil.html?_r=1