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Oil companies impatient for 'new Iraq'

BAGHDAD, Feb. 7 (UPI) -- As the cameras roll, Iraq's Oil Minister Thamer Ghadban announces that he will build a new database mapping the country's lucrative oil reserves.

Waiters in white shirts and bow ties bear cookies and Cokes on silver trays into the glassed-in conference room on the sixth floor of the former Defense Ministry building. Female data entry workers, their heads covered by colorful scarves, stand patiently outside the room, smiling at all of the fuss.

This is the face of an elite Iraq that few get to see. Foreign companies invite oil officials to neighboring Jordan to cut deals, since it's considered too dangerous for CEOs to travel to Iraq, ministry officials say privately. But the prospective oil wealth waiting just under the surface is luring international oil giants to offer computers, trips, training, and possibly cold, hard cash.

Exploration Consultants Ltd., of London, donated the $250,000 database system and the training to run it. In recent months British Petroleum-Amoco, ChevronTexaco and others have invited select groups of engineers and others across the world to learn about developments in the past 10 years in oil exploration and drilling. Iraq workers were isolated from the world during 12 years of international sanctions following the 1991 Gulf War.

"This will make us able to solve technical problems ourselves," Ghadban said of the new database system. "We will become self-sufficient and be able to manage production. This will help us work better with foreign companies."

But the threat of violence is real to foreigners and Iraqis alike. Insurgents blow up pipelines somewhere around the country almost daily. They killed 12 Iraq troops affiliated with a special pipeline security battalion 1,500-strong near the northern oil city of Kirkuk last week.

Getting to see the minister means dealing with four sets of guards, a pat-down search and walks through two metal detectors. Instead, most companies send the $5,000 in earnest money required to bid on new projects and lobby oil officials until they hear back, Ahmed al-Shamma, a deputy minister, said recently.

The biggest prize? A possible $3 billion contract to build a new "super refinery" producing gasoline and other oil products from up to 1 million barrels per day of Iraq crude, said a senior U.S. Embassy official in Baghdad, declining to be named. An announcement could come by the end of the month; building a new refinery could take more than two years.

Companies such as Shell, Exxon and Chevron are offering all sorts of pot sweeteners to get on a refinery short list, the official said. Each one wants a "one-off" production-sharing agreement that will make it worthwhile to deal with the volatility in Iraq, including a still-changing government.

Instead, U.S. advisers are recommending that the government write a petroleum law to keep things open and transparent. "One-off" deals create conditions that encourage corruption, the official said.

"If we go contract by contract, other companies will out-bribe the United States companies, and we will lose," the official said. "We want an fair, open, equal process, and U.S. companies have better technology."

No foreign company can own land or extract natural resources under rules written by U.S. administrators after U.S. troops came into the country in April 2003.

Also still up for discussion are existing extraction contracts such as one signed by former president Saddam Hussein with Russian giant Lukoil, which has now been joined by ConocoPhillips. The current interim government has said that contract is void, but a newly elected parliament expected to be seated by the end of the month, may think otherwise. Other deals are still up for grabs.

In the meantime, Ghadban and an interim government "ministers' council" have approved at least six smaller refineries in recent weeks. A 30,000 barrel-per-day "package refinery" will be built in Koysenja near the northern city of Suleiymania, officials say. Another one is slated for Koya, nearby. In northern Mosul, where recent fighting kept some polls closed on Election Day, a refinery is planned to deal with crude reserves, said Asim Jihad, an oil ministry spokesman.

In the south, a new 10,000 barrel-per-day refinery recently came online in Nasriyah. A 230,000 barrel-per-day refinery is to be built in Najaf, a Shiite Muslim religious site, and another in Musayab.

Iraq's three workhorse refineries in northern Beiji, central Daura and southern Basra currently process less than 500,000 barrels per day of crude oil, leading, in part to gasoline shortages around the country. Long lines of cars at gas stations continue to plague the capital.

But many say the lines are caused by smugglers taking Iraq's heavily subsidized gasoline to other countries, since Iraq is currently importing up to $200 million per month in gas and other oil products. Consumers pay about a penny for a liter of gas at the pump.

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