Oil and foreign investment

From San Francisco Chronicle:

Iraqi officials are drafting a law that would encourage international companies to invest in the country's tattered oil industry, run by the state since 1972. The current finance minister, a candidate in the election, announced the legislation late last month, although he offered few details.

"So I think this is very promising to the American investors and to American enterprises, certainly to oil companies," Finance Minister Adil Abd al-Mahdi said at a National Press Club conference in December.

The companies' ties to Iraq are growing. In the past two months, the Oil Ministry has signed a flurry of agreements to study the potential of the underdeveloped oil fields and train Iraqi engineers in the latest technology and techniques.

BP will study the Rumailah oil field near Basra, an Iraqi-Turkish consortium will help develop the Khurmala Dome oil field, ExxonMobil Corp. is laying the groundwork to provide technical assistance. They reportedly also include Vitol, Anadarko Petroleum Corp. and Dome Oil of the United Arab Emirates, who have been awarded a reservoir study of the Suba-Luhais oil fields in southern Iraq.

Interestingly, Royal Dutch/Shell Group will study Kirkuk and natural gas for free to "build a relationship with the Iraqis", and ChevronTexaco has been flying Iraqi oil engineers to the United States for training since last year as a "goodwill gesture" (and definitely not with the expectation that any favour will be returned).

The effect of the election outcome on the fundamental structure of the sector should be minimal:

"The elected parliament will look into oil contracts and decide how to deal with international companies as far as investment," Allawi told reporters.

"Economic policy will move away from government intervention and allow private investment. The state will no longer monopolise everything, including the oil sector, except for the upstream, which will be under the jurisdiction of the elected Iraqi government."

Allawi, a contender to lead Iraq after the elections, has recommended to the Oil and Gas Council, which he heads, to use production sharing model to attract investment.

But Allawi might not hang to power after the January 30 polls ... The economic preferences of Sistani's list are unknown, although Finance Minister Adel Abdel Mehdi, a leading member of the bloc and a candidate to replace Allawi as prime minister, favours foreign investment and has been building ties with US officials keen to see Iraq's oil sector open up.

But from previous experience, the devil's in the details. Is it just me, or is there an infinitely larger number of ways for things to go wrong than right? This could take a while.