Iran, Russia revisit Hussain-era deals

This could include a US$3.7 billion plan to develop the West Qurna oilfield.

Seeking to improve political and economic relations, Iraq and Russia have agreed to work together to restore oil development contracts which were disrupted by the 2003 US-led invasion of Iraq. Those could include a US$3.7 billion (Dh13.59bn) deal to develop Iraq's West Qurna oilfield that Baghdad signed, and later cancelled, with a Russian consortium led by Lukoil while Saddam Hussein was in power. "The goal has been set to restore the contracts concluded between Russian and Iraqi companies before the war," Sergei Shmatko, the Russian oil minister, said in Moscow after a meeting at the weekend between the Russian and Iraqi leaders. "I believe that this is a very big move." Lukoil has been lobbying the Iraqi government for years to honour Saddam-era contracts, including the suspended West Qurna agreement. But in Sept 2007, acting on US legal advice, the Iraqi oil minister, Hussein al Shahristani, informed Russian officials of a "final" decision not to revive the deal. Moscow responded by threatening to revoke a 2004 agreement to forgive Iraq $13bn in debt, contributing to a chilling of diplomatic relations between the two countries. Low oil prices have sent Baghdad on an urgent quest for partners willing to help increase its oil exports, which are the country's main source of revenue for reconstruction projects. "We are ready to develop ties with Russia," Nouri al Maliki, the prime minister of Iraq, said on Saturday at a meeting with Dmitry Medvedev, the Russian president. "Russian companies possess rich experience in co-operation with Iraqi partners. They are already active in Iraq, but we are interested in expanding their presence," he said at a separate meeting with Vladimir Putin, the Russian prime minister. Following that meeting, Mr Shmatko said two Russian energy contractors, Technopromexport and Stroytransgaz, could join projects in Iraq. The Russian oil and gas companies Gazprom, Tatneft and Lukoil wanted to participate in bidding rounds for contracts to develop Iraqi oil and gas fields, according to news agencies which cited senior company executives. "The political situation in Iraq is stabilising. Lukoil's office is up and running and we are prepared to work," said Vagit Alekperov, the chief executive of Lukoil, according to Itar-Tass, the Russian news agency. The fields covered by Iraq's ongoing bidding rounds include West Qurna, one of several giant oilfields in the south of the country. The Iraqi oil ministry's position regarding Lukoil has been that the Russian company would have to compete for a new contract with other firms interested in developing West Qurna. Mr al Maliki gave no direct indication during his recent visit to Moscow that this would change. Nonetheless, the oil ministry has entered direct negotiations with a handful of western energy companies over contracts to develop fields that were not included in the bidding rounds. It might consider doing the same with Lukoil over West Qurna or another field, especially if it becomes frustrated with progress or results from the bidding process. Last year, the oil ministry renegotiated and signed a Saddam-era deal with the China National Petroleum Company, awarding the Chinese company a $3bn contract for technical services over 20 years. It also signed a preliminary agreement with Royal Dutch Shell for a project to capture and market gas produced at oilfields in southern Iraq. While Iraq invited mainly large western oil companies to bid in its first competitive oil-licensing round, for which the bidding period closed last month, it also shortlisted state-owned oil companies from Japan, China, India, Pakistan, Vietnam and Angola, along with a mid-sized Scottish firm and Russia's Rosneft and Tatneft, to bid in the second round. Analysts said the entry of new players could help Baghdad counter domestic concerns that large, private-sector firms could hijack the government's oil agenda. The Iraqi authorities will not allow international oil companies "to get a bigger part of the cake", said Ehsan ul Haq, the head of research at JBC Energy in Vienna. "They will not allow these companies to take control of their oil policy." Iraq's proved oil reserves of 115 billion barrels are the third largest in the world, behind those of Saudi Arabi and Iran. The Gulf state is a member of Opec, but is exempt from the group's production quotas. [e-mail]