Iraq to pay oil firms to boost its output

By Randy Fabi and Ahmed Rasheed

BAGHDAD (Reuters) - The Iraqi government is expected to pay up to $2.5 billion to five top oil companies to increase the country's oil output by nearly a quarter, a government adviser told Reuters on Wednesday.

In what would be the biggest foreign involvement for decades, Baghdad is close to signing technical support contracts with BP, Royal Dutch Shell, Exxon Mobil, Chevron and Total.

Thamir Ghadhban, energy adviser to Iraq's prime minister, said he expected the contracts, which would add 500,000 barrels per day (bpd) to current production of 2.27 million bpd, would be signed by early next month.

"There is a rough estimate that it could cost about $400 to $500 million per field," he said in an interview.

"So a total could be up to between $2 (billion) and $2.5 billion over two years that should be paid by the government to companies."

With oil prices at around $100 a barrel, the contracts could mean extra revenues to Iraq of around $1.5 billion a month before costs, according to Reuters calculations.

Ghadhban said Iraqi representatives met with company officials last week in Amman, Jordan, to discuss final details of the initially two-year contracts, including whether payment would be by cash or by oil.

"As far as we are concerned, everything is positive and it's a matter of time for the minister of oil and oil companies to finalize and shake hands," he said.

Shell is negotiating for the northern Kirkuk oilfield and is also in talks, along with BHP Billiton, for the development of the Maysan fields.

BP also has its eyes on Iraq's southern Rumaila field, while Exxon wants the contract for the Zubair oilfield in Basra.

Finally, Chevron and Total are looking to work together to develop the West Qurna oilfield.

Ghadhban said he expected the companies to boost output by around 100,000 bpd at each of the fields.

HEAD START

The ongoing talks have also given the five major oil companies a head start in efforts to bid for future oil contracts.

"I have no doubt whatsoever those five major companies are going to be qualified," he said. "They are major oil companies and of course they will be qualified."