Iraq for long-term oil contracts

Iraq is open to the idea of entering a long-term oil and fertiliser supply agreement with India, the country’s industries and minerals minister Fawzi Hariri said.

Hariri, who is in Delhi to participate in the second India Arab Investment Conclave, said he has held meetings with the Indian government over the proposal.

“The Indian government is keen to secure a long-term supply of oil for its needs. As our production increases over the coming years, we will be able to enter a long-term strategic supply contract with India,” Hariri said.

Unlike many other countries, the Iraqi government has not completely handed over its oil fields to contracts. Instead, it has opted for a commission-based model, where contractors are paid a fixed fee for every barrel of oil produced, especially for fields already in production.

In keeping with the policy, last month, the government awarded development contracts to international companies such as Exxon Mobil, Royal Dutch Shell, Italy’s Eni, British Petroleum and China National Petroleum Corp. The fields account for around a quarter of Iraq’s proven oil reserves of around 112 billion barrels, the fourth largest in the world.

The move was targeted at increasing its production rates from around 2.5 million barrels per day (bpd) to 7 million bpd in six years. Iraq will also invite bids for several new blocks by the end of the year, which is expected to increase production rates to around 10 to 15 million bpd over the next five years, Hariri said.

India, in comparison, currently consumes around 3 million barrels of hydrocarbons per day, a figure that is increasing at 12-15% every year. Domestic production, however, has idled at less than a million bpd for many years.

Hariri said that Iraq has proved natural gas reserves of around 110 trillion cubic feet, about ten times the proven reserves in Reliance Industries’ D6 block, and the country is eager to increase the production of fertilisers and export it to India. India, he said, has both the demand and the technical know-how to increase fertiliser production in his country, which is currently barely able to meet domestic demand.

Hariri also invited Indian companies to be part of the reconstruction of his country’s infrastructure, which has been ravaged by neglect and war. A total of $150 billion, for example, will be spent on various construction and infrastructure projects in the country.

“There are 44,000 km of highways that have reached the end of their design life of 20 years. The demand for power is 13,000 megawatt against a capacity of 7,000 megawatt,” he said.

Unlike most Gulf countries, Iraq allows 100% foreign ownership in companies and even offers a 10-year tax holiday to entice investors.

Iraq, the site of one of the earliest irrigated fields in human history, is also willing to lease out farmlands to foreign companies for growing ‘strategic’ or seasonal crops, both for exports and domestic markets, he said.