Iraq Foreign Oil Investors: Tread Lightly
Written for CBSNews.com by CBS News correspondent Elizabeth Palmer, reporting from Baghdad.
The Iraqi government has a problem - it needs international help to repair and modernize its creaking oil industry.
But it has one other, bigger problem: How to get that help without being accused of selling out to American multinationals, under pressure by the U.S. administration.
At a press conference Monday, during which officials announced the opening up of six key oil fields to international investment, the Oil Ministry tried to walk a fine line.
At the front of the room, a giant screen displayed a list of 41 foreign companies selected to bid on Iraqi oil development contracts. Only 6 of them were American.
"After all, oil is the property of the Iraqi people - as the Constitution states," said Iraqi Oil Minister Hussain al-Shahristani in an interview with CBS News.
He knew any remarks he made would be scrutinized by everyone - and that includes Parliamentarians, labor leaders, and nationalists - who believe the United States invaded Iraq for its oil, and is about to get its hands on the spoils.
Yes, there has been lobbying and political pressure from some American politicians, said Shahristani.
"But I told them in very clear terms that Saddam's era has gone. No external or internal politics is going to influence our decision. We are blind to the nationality of the oil companies."
"The best bid to develop our oil fields in Iraq's interests will be chosen, and on that basis only."
International oil companies have not been allowed to operate in Iraq since 1972, when the industry was nationalized and many Iraqis resent the idea of allowing them back in.
But the Oil Ministry says foreign help is necessary to boost production in a hurry with innovative equipment and modern operating methods.
According to its own statistics, the Oil Ministry itself has 90,000 employees; 98 percent of them haven't seen new oil technology up close for more than 20 years.
Early in 2009, the foreign companies on the approved list will be invited to bid on contracts that pay a cash fee for work in oil fields already pumping oil.
The goal is to boost Iraq's production by 1.5 million barrels a day, to a total of 4.5 million by 2012.
But the real prize for American, and other international companies is much more lucrative - and controversial.
They are so-called production-sharing agreements (PSAs), which give companies more control over the projects and allow them to take their profits in oil.
However, PSAs could be the red line for Iraqis, especially the powerful oil workers unions which regard these contracts as a sellout of the national birthright.
It's no surprise Shahristani is circumspect about if, or when, the government will allow PSAs. Any serious labor opposition, especially widespread strikes, could shut down an already crippled industry.
"Our producing fields - and some of them are super-giants - will not be offered for PSAs. But when we come to undeveloped fields - smaller fields … what form of contract will be offered will have to be discussed then."
"If the Parliament and the Ministry feel PSAs serve the best purpose for Iraq for certain fields... then they will be considered."
