Iraq PM Advisor: Majors Will Accept Service Contracts

International oil majors would be willing to settle for service contracts in known oil fields in Iraq, the chairman of the advisory committee to Iraqi Prime Minister Nouri al-Maliki said Thursday.

Speaking in an interview with Arab Oil and Gas Magazine, Thamir Abbas Ghadhban, who is a former oil minister, said he was certain international oil companies would accept service contracts...for already discovered oil fields " in view of their geological characteristics, their very great potential, their low production costs and the current and future level of oil prices."

While production-sharing contracts, or PSCs, wouldn't be considered an option by anyone "of sane mind," for these oil fields, the government would have to decide if they were appropriate in areas under explorations -- including the Western Desert region, Ghadhban said.

The exploration risks for companies involved in areas such as the Western Desert are compounded by the fact that that even basic infrastructure is practically nonexistent.

Royal Dutch Shell PLC, BP PLC, ExxonMobil Corp. and Chevron Corp. are among the majors expected to sign Technical Support Agreements with Iraq over the coming few weeks.

The Iraqi Oil Ministry has said more than 70 companies are lined up to sign service contracts over the next 18 months.

The contracts, which allow the companies develop a country's oil industry in exchange for oil or a much smaller percentage of revenue than when production is shared, are seen as a stop gap until a national oil law governing the distribution of Iraq's oil resources is agreed between Baghdad and the Kurdistan Regional Government.

Attempts to ratify the law have been hampered by political and ethnical complications in the region.

"I think there is still the possibility of compromise on the text. The differences between the two sides are not huge," Ghadhban said.

However he didn't give a time frame, saying it wasn't possible to predict when the such an agreement might be reached.

"In the current situation in Iraq, delays in the decision-making process are frequent," he added.


Copyright (c) 2008 Dow Jones & Company, Inc.

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