A senior Iraqi oil official told Dow Jones Newswires the talks were in the early stages but could develop into contracts.
The official, who spoke on condition of anonymity, said the Japanese government would pay for the cost of the contracts as it has pledged $5 billion until 2005 for Iraq's postwar reconstruction. "The Japanese government will pay for such investment, so why not encourage them to do so," the official said.
News reports last month said Japan's Mitsubishi Corp., leading a consortium of Japanese companies, had held talks with senior officials at the Iraqi Oil Ministry to develop gas and oil fields. Reports said the Iraqis had welcomed the idea but no contracts had been signed yet.
Japanese companies are eyeing the 1 billion barrel al-Gharaf oil field in southern Iraq. Talks about the field stopped after the 1991 U.S.-led Gulf War.
Japan, which used to be one of Baghdad's largest trade partners, opposed Iraq's invasion of Kuwait and supported the U.S.-led war to remove troops from Kuwait.
Meanwhile, Iraqi press Sunday quoted a U.S.-appointed Governing Council official as saying that Baghdad would allow Russian and French companies to compete for contracts to develop Iraq's oil fields.
Russia and France opposed the U.S.-led war that ousted Saddam Hussein's government last April. The Pentagon has decided to bar countries that opposed the war from taking part in the reconstruction efforts, with a price tag of more than $18 billion.
However, the official said Iraq could renew the $3.8 billion contract that Saddam's government abolished with the Russia's Lukoil to develop the giant West Qurna oilfield. The contract was signed by the former government in 1997 but it was canceled a few weeks before the U.S.-led invasion of Iraq in March. France's Total negotiated during Saddam's rule the giant Majnoon and Nahr bin Umar oil fields in southern Iraq.
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