New contracts could give Iraq quick oil fix

By Simon Webb and Ahmed Rasheed - Analysis

DUBAI/BAGHDAD (Reuters) - Iraq is exporting more oil than it has for years and is on the verge of signing deals with oil majors that could quickly take output higher, oil officials say.

Baghdad expects this month to conclude negotiations for six oilfield service contracts with international companies that could boost output this year.

The deals could provide the extra 200,000 barrels per day (bpd) in exports Iraq wants from the southern Basra terminal by the end of 2008. Basra accounts for most of Iraq's exports, shipping more than 1.5 million bpd.

"Provided they are signed promptly, these deals could give quick progress," said an executive at a western oil company negotiating for one of the contracts.

"They are the first step towards real improvement in a sector that has been under stress for 30 years."

Iraq expects June exports to reach 2.2 million barrels per day, the highest for monthly shipments since the U.S.-led invasion of March 2003. Baghdad sees exports rising further to 2.3 million bpd by the end of 2008.

The oil sector has increased output as security has improved but oil companies remain nervous.

Iraq will contract international oil firms to help manage operations at its largest producing fields such as Rumaila in the south, supplying equipment to refurbish dilapidated infrastructure.

The two-year deals call for a total output boost of 600,000 barrels per day. Once the contracts are signed, Iraq plans to offer the same fields in a bidding round for longer-term development.

The industry needs billions of dollars for renewal and expansion. The service deals are part of stop-gap measures to attract part of that investment in the absence of a vital oil law.

Political disputes have stalled the passage of an oil law through parliament for over a year. The legislation aims to set the terms and extent of foreign investment in developing the world's third largest oil reserves.

"Considerable progress can be made without the law," said Muhammad-Ali Zainy, senior energy analyst at the London-based Centre for Global Energy Studies.

"These contracts are a big step forward and will help bring new methods and technology to these important fields."

BETTER SECURITY

Improved security has yielded gains of nearly 500,000 bpd in northern exports since last summer. Sabotage had kept that line mostly idle since the war.