London (Platts)--30Apr2009

Iraq will continue to seek foreign partners to help it boost its crude
production to 6 million b/d in the next few years through oil bid rounds and
direct negotiations, Deputy Prime Minister Barham Salih said Thursday.

Salih was addressing a conference aimed at attracting international
investment into all sectors of Iraq's economy.

"We are planning to boost output to at least 6 million b/d in the coming
three to five years," Salih told said.

He stressed the importance of using the expertise of international oil
companies to develop oil production beyond current levels of around 2.5
million b/d, saying saying greater foreign investment and "partnership with
international oil companies" in the sector was "the only way" to mobilize the
"knowhow" that would help Iraq achieve its aims.

"We will maintain the licensing rounds but will also continue direct
negotiations," Salih said.

Iraq last year launched two licensing rounds, offering foreign oil
companies 20-year service contracts to further develop producing oil fields
and discovered but not yet developed fields. It has also included gas fields
in the bid rounds with first contracts due to be awarded in June.

The Iraqi oil ministry has also been negotiating bilateral agreements
with a handful of oil companies outside the bidding process and has invited a
mix of foreign oil companies, including Japanese companies, to bid for
specific oil fields.

The first uncontested contract went to China's CNPC, which was awarded an
amended version of a 1997 contract for the al-Ahdab oil field, without
parliamentary approval. This was followed by a gas agreement signed with Anglo
Dutch Shell again in a no-bid process that has come under criticism from some
Iraqi politicians who see it as tantamount to giving Shell a monopoly over
southern gas production.

Iraq has also invited Italy's Eni, Japan's Nippon Oil and Spain's Repsol
to tender exclusively for development of the Nassiriya oil field and
refinery. Last month, the US' Chevron, Total, Norwegian StatoilHydro and
Petrobras of Brazil were invited to bid for the further development of the
Nahr bin Umar field.

Salih said the financial crisis had given added urgency to boosting oil
production levels but noted that "the regeneration of Iraq's economy will not
be realized through oil revenues alone."

Iraq, which relies almost exclusively on oil exports to generate
revenue, is facing sharply lower earnings as a result of lower international
oil prices and a relative decline in its production, particularly from its
overworked southern oil fields.

A final tender protocol (FTP) submitted by the oil ministry to more than
30 foreign oil companies which qualified for the first bid round shows that
the Iraqis have raised substantially the amount of signature bonuses the
winning oil companies would have to pay. A Platts calculation shows that Iraq
is now seeking a total of $2.6 billion in signature bonuses, far higher than
the industry average.

Former oil minister Thamer Ghadban said the signature bonuses were not
much given Iraq's reserves. Iraq has proven reserves of 115 billion barrels
but the figure could be far higher because the country remains largely
unexplored as a result of decades of war and UN sanctions.

"It's a commercial loan to the government," Ghadban told Platts on the
sidelines of the conference. "We are not asking for much given that the stakes
are so high."

He said the bid rounds would continue though Nassiriya and Nahr bin Umar
had been allocated for direct negotiations. Ghadban said a decision on whether
to allocate further fields for development through direct negotiations would
be assessed once the outcome of the earlier awards became clear.
--Margaret McQuaile, margaret_mcquaile@platts.com