British energy giant BP and China's CNPC International Ltd were unveiled Tuesday as the first foreign firms in decades to win contracts to invest and develop in Iraq's war-battered energy sector. The companies succeeded in their bid for the giant Rumaila oil field in southern Iraq, which has known reserves of 17.7 billion barrels, the oil ministry announced. The contract was the first to be awarded in open tendering for six major oil fields and two gas fields, nearly four decades after Saddam Hussein's party nationalized the Iraqi energy sector. The deals will provide the government with much-needed revenue as it struggles to rebuild the country after three wars and more than a decade of debilitating economic sanctions. “These contracts are needed for the reconstruction of Iraq,” Prime Minister Nuri Al-Maliki said at the opening of the bidding session in Baghdad. “They are for the benefit of Iraqis and the companies.” The bidding process has attracted bids from 31 firms including US and European giants ExxonMobil and Shell but also a swathe of Asian companies from China, India, South Korea and Indonesia. The oil deposits, holding known reserves of 43 billion barrels of crude, are in southern and northern Iraq while the gas concessions are west and northeast of Baghdad. “Our principal objective is to increase our oil production from 2.4 million barrels per day to more than four million in the next five years,” Oil Minister Hussein Al-Shahristani said in an interview with Iraqi public television. Increasing production to that level will, according to him, pump an extra $1.7 trillion into government coffers over the next 20 years. Shahristani has said that only $30 billion of that sum will go to the companies which have extracted the oil. The rest “is a huge amount that would finance infrastructure projects across Iraq - schools, roads, airports, housing, hospitals,” he said, insisting that the country would retain control over its oil reserves. For energy firms, the appeal is the opportunity to plant a foot in the country, their first chance to do so since the Baath party nationalized the Iraq Petroleum Company in 1972, seven years before Saddam took power. The foreign firms awarded deals will have to partner with Iraqi government-owned firms, principally the South Oil Company (SOC), and share management of the fields despite fully financing their development. They will be paid a fixed fee per barrel, not a share of the profits, and the fee will only be paid once a production threshold set by the government is reached. Meanwhile, China announced its second gasoline and diesel price hike in a month on Tuesday, raising fuel prices in Beijing to their highest level ever. The hike meant the average maximum price Chinese retailers were allowed to charge was now higher than the average paid by American motorists, triggering concerns about the impact on the economy. The average maximum retail price for gasoline was increased by 8.7 percent to 7,530 yuan (1,100 dollars) per tonne, according to a statement from the National Development and Reform Commission, the top planning agency. China's average maximum gasoline price was raised to $3.10 per gallon, compared to an average of about 2.65 per gallon paid by US consumers last week. The price for diesel was raised by 9.7 percent to 6,790 yuan per tonne, the statement said. The increase comes after a rise of six to seven percent in gasoline and diesel prices on June 1. Oil prices rose to near $72 a barrel Tuesday after briefly jumping above $73, an eight-month high, due to a weakening US dollar and attacks on oil installations in Nigeria. By mid-afternoon in Europe, benchmark crude for August delivery was up 13 cents to $71.62 a barrel in electronic trading on the New York Mercantile Exchange after trading as high as $73.38 earlier in the session. On Monday, it gained $2.33 to settle at $71.49. In London, Brent prices were up 1 cent to $71.00 a barrel on the ICE Futures exchange.
