Iraq Invites Big Oil To Bump Up Production

The Iraqi government says it has opened six oil fields for bidding from international firms to boost production.

Oil Minister Hussain al-Shahristani says the 35 oil companies that qualified for bidding include several majors from the West, such as Shell, BP, Exxon Mobil and Total.

He says the oil fields are: Rumeila, Zubair, Qurna West, Maysan, Kirkuk and Bay Hassan.

All the fields are already producing oil, but al-Shahristani said Monday the new contracts would raise Iraq's production by 1.5 million barrels per day.

The deadline for the bids is the end of March 2009, and preliminary contracts will be signed next June.

Al-Shahristani says Iraq will also open natural gas fields of Akkaz and Mansouriyah for bidding. He gave no timeframe for that.

As for the implications of Iraq's announcements on the oil markets, "just announcing it is good news," said Leo Drollas, the senior oil analyst and forecaster at the Center for Global Energy Studies, who added that the move by Iraqi officials had been long-anticipated.

"The announcement would, on its own, without anything else, bring the prices down, the futures prices in particular, because it's a positive event. It will put more oil onto the market," Drollas told CBSNews.com, "and more oil is desperately needed."

However, those lower prices for crude on global markets will not likely trickle down to the consumer anytime very soon, he said. "That'll take time, that's affected by real barrels," not futures prices.

And the real barrels - the 1.5 million real barrels of new crude Iraq hopes to get onto the market with this investment invitation - "it won't happen overnight," according to Drollas, who said he'd be surprised to see production increase by that amount within a year.

"The devil will be in the details" of the contracts with foreign investors, he said, as big Western companies will likely be reluctant to sign on solely as support contractors - wanting instead to produce oil from the fields under their own auspices and for their own profits.

But, said Drollas, there is room for that expansion in the six fields listed by the Iraqis, "especially the Qurna West field, which is a field with enormous potential but which has been producing at a low level. That alone could change things.

"Iraq has been such a disappointing story, to put it mildly, that any news of this kind is wonderful," said the London-based analyst.

Meanwhile, oil prices set a new trading record early Monday, with light, sweet crude trading above $143 per barrel for the first time before pulling back and trading up $2.11 at $142.32 in pre-market electronic trading on the New York Mercantile Exchange.

Iraq's announcement came as consumers howl over ever-increasing fuel prices and the United States pushes Saudi Arabia to produce more crude - and a desolate patch of sand 100 miles west of the Saudi capital of Riyadh becomes one of the most important places in the world economy.

Saudi Arabia's state-owned oil company, Aramco, is spending $10 billion to build the infrastructure to pump 1.2 million barrels of oil per day by next June from the Khurais oil field and its two smaller neighbors. That alone would be more than the total individual production of OPEC members Qatar, Indonesia and Ecuador. (Read more on the Khurais oil field's potential.)

The project forms the centerpiece of the Saudi plan to increase the total amount of oil it can produce to 12.5 million barrels per day by the end of 2009 - up from a little more than 11 million barrels per day now.

Drollas said the Iraqi announcement was, in many ways, more significant than the Saudi's announcement, saying Saudi Arabia had made, "more of a PR exercise" than an actual increase in production. He said their recently announced increase was largely just a move to reinstate production that had been reduced in previous years.

Iraqi oil fields generally produce crude that is considered fairly attractive to investors - easier and cheaper to refine into useable gas than the crude pumped from Saudi Arabia, but not quite as desirable as the sweet, light crude produced in Nigeria, according to Drollas.