State oil company 'to oversee Iraqi fields'

Iraq will put its most prized oilfields under the control of a new national oil company that can invite multinationals to help boost exports and production, Iraqi Oil Minister Hussain Shahristani said today.

Iraq needs billions of dollars in foreign investment to revive its shattered economy and officials are in last ditch talks to finalise a draft law for the energy sector that sets rules for sharing the country's oil wealth.

"Twenty seven producing oilfields, including all the giant fields and super giants, are earmarked for the Iraqi National Oil Company (INOC). They are booked to INOC, which can co-operate with other companies to increase production from these oilfields," Shahristani told Reuters in an interview.

Talks with international firms on contracts will begin after parliament passes the law, he said. Shahristani declined to say when he expected the law to go before the parliament, but was confident negotiations would conclude within days.

"The main fields (to be developed) will be the already producing oil fields like Majnoon, Qurna, Zubair, North Rumaila and South Rumaila, even the Sharki Baghdad oilfield," he said.

"We have proven that this (Sharki) is a supergiant oilfield and therefore these will have the priority to be developed," he said.

Iraqi officials are engaged in intensive talks to complete a draft oil law after a last-minute wrangle over wording thwarted plans to put it to the cabinet this week, the oil minister said.

Shahristani was confident, however, that an accord would be reached soon on the legislation.

Since the Oil Ministry announced last week that the Oil Committee, comprising cabinet ministers and regional leaders, had finalised a deal, officials from the Kurdish regional government have demurred, saying they were still dissatisfied.

"Unfortunately we had differences on the wording. We were surprised. We are still working to finish as soon as possible," Shahristani said.

"We did not expect the Kurdish reaction. The impression we came away with after the talks (last week) was that the draft was acceptable as we had it," he said.

Passing an oil law to help settle potentially explosive disputes among Iraq's ethnic and sectarian communities over the division of oil reserves has been a key demand of the US in providing further military support to the government.

The Oil Committee has been drafting and redrafting the document for months and missed its own deadline of finalising it by the end of 2006.

The Kurdish government had reservations on the wording regarding the powers of a federal council, to be established under the law, which will set the oil policy and lay down ground rules for contracts signed with foreign companies.

"The federal council will set down sample contracts, instructions for negotiations," Shahristani said, as well as deciding which foreign companies were eligible to negotiate contracts.

"It will also set the oil policy, such as which oilfields will be developed and based on what sample contracts," he said.

Shahristani said the federal council, overseen by the prime minister, will have to approve plans from the oil ministry for developing the oilfields and said that the policy will seek to ensure a balance in developing the oilfields across Iraq.

As it stands, existing contracts signed by the Kurdish regional government need to be brought into conformity with the new guidelines and submitted to the Federal Council, he said.

Officials from Kurdistan, where relative security has encouraged more development than elsewhere in Iraq, say they are seeking assurances that the Federal Council will not invalidate their existing contracts, including agreements with Norway's DNO.