By Ahmed Rasheed
BAGHDAD (Reuters) - Iraq threw open the world's thirdlargest oil reserves to foreign firms on Monday, puttingBritish and U.S. companies in pole position five years afterU.S.-led troops invaded the country to oust Saddam Hussein.
The move to invite bids for the development of Iraq'slargest oilfields will mark the return of the oil majors, whosecash and technical expertise Iraq needs to restore its oilinfrastructure that has been hard hit by sanctions and war.
But any awards to U.S. and British firms are likely toanger opponents of the invasion, who have said the 2003 war wasdesigned to give Western oil companies control over Iraqi oilreserves. U.S. and British officials have denied the charges.
By allowing international firms to help raise output at itsmajor oil fields, the Iraqi government is breaking with thepolicy of major oil-producing neighbours such as Saudi Arabia,Kuwait and the United Arab Emirates whose national firms keeptight control of foreign investment in their oil sectors.
"The six oilfields that have been announced today are thebackbone of Iraq's oil production, and some of them are gettingold and production is declining," Oil Minister Hussainal-Shahristani told a news conference.
He listed the areas as Rumaila, Kirkuk, Zubair, West QurnaPhase 1, Bai Hassan and Maysan -- which comprises threeseparate fields: Bazargan, Abu Gharab and Fakka.
The Oil Ministry said they were open for long-termdevelopment contracts. Iraqi has prequalified 41 foreign firms.
Shahristani said he hoped contracts could be signed in June2009 to raise output by a combined 1.5 million barrels per dayat those fields. He added that Iraq aimed to raise output to4.5 million bpd by 2013 from the current 2.5 million bpd.
He also said the foreign bidders must take on a localpartner with a minimum 25 percent stake in the deal; and thatany firm that wanted to bid must open an office in Baghdad.
Currently, few foreign companies have any presence in Iraqbecause of the security situation but recent security gainsmight encourage foreign companies to start investing in Iraq.
SHORT-TERM DEALS
Iraq said last week it also hopes to sign six short-termoil service contracts during the next month.
Taken together, the short-term and long-term contracts willopen the door to major international involvement in the OPECmember's oil sector for the first time in nearly four decades.
The majors have been positioning themselves for years inthe hope of eventually gaining access to Iraq's oil reserves.
Its proven reserves, at 115 billion barrels, are theworld's largest after Saudi Arabia and Iran, and Deputy PrimeMinister Barham Salih said in April that as-yet unprovenreserves could make the overall total as much as 350 billionbarrels.
"We feel it is very important for Iraq to arrest anydecline and increase production," Shahristani said.
The short-term service deals, each worth about $500 million(251 million pounds), are aimed at quickly lifting output atIraq's largest producing fields by a combined 500,000 barrels aday.
Five of the short-term deals that have been underdiscussion are with Royal Dutch Shell; Shell in partnershipwith BHP Billiton; BP; Exxon Mobil; and Chevron in partnershipwith Total.
Iraq has also been in talks with a consortium of Anadarko,Vitol and Dome for a sixth short-term contract.
Those talks on the short-term deals have given the majorsconcerned a head start in efforts to bid for future contracts.
In terms of the short-terms contracts, Shell negotiated forthe Kirkuk oilfield in the north and was also in talks on theMaysan fields, Iraqi officials have said. BP has its eyes onthe Rumaila field in the south, while Exxon wants the contractfor the Zubair oilfield, in Basra province, also in the south.
And Chevron and Total were looking to work together todevelop West Qurna, also in Basra.
RESENTMENT
But many Iraqis still bear a grudge after British, Americanand French oil companies controlled their oil industry for halfa century through the Iraq Petroleum Co (IPC).
It was an era when Western majors working in the MiddleEast used oil output and prices as an economic and politicaltool, analysts said.
From the time it struck oil at the huge Kirkuk field in1927 until nationalism forced it out in 1972, IPC -- made up ofBP, Exxon, Mobil, Shell, CFP (Total) and Partex - ruled theroost.
That did not sit well with Baghdad, which resented IPC'scontrol over its revenues.
Oil is Iraq's main source of income, and boosting output iskey to earning the cash the country needs for reconstruction.
Iraq's cabinet agreed a draft oil law in February lastyear, but it has failed to get through parliament.
In the absence of the law, Baghdad has moved ahead with thecontracts, saying this is in line with an old oil law inexistence before the invasion that toppled Saddam.
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(Writing by Dean Yates; Editing by Samia Nakhoul)
