Iraqi oil licensing round runs into trouble

International oil companies were submitting bids for six oil and two gas fields 30 years after Saddam Hussein nationalized the oil sector and expelled foreign firms. The televised process coincided with Iraq assuming formal control over its cities — a step toward ending the U.S. combat role in the country.

But from the start, the licensing round appeared to be running into trouble.

Three fields were offered by midmorning but only one deal was struck, even as Iraq's prime minister sought to allay company concerns that poor security could damage business prospects and contracts could be voided by future governments.

The government was hoping that the high-profile licensing round — televised to prove its transparency — would help with budget woes while rebuilding Iraq's dilapidated oil industry.

Crude sales fund 90 percent of the government's budget, and the collapse of oil prices in the second half of 2008 hit Iraq hard.

The country's oil industry has suffered from years of neglect and sanction, and foreign firms are seen as offering the necessary expertise to help raise production from current levels of 2.4 million to 4 million barrels per day.

Some analysts have said companies may be unwilling to commit to major ventures in Iraq, opting to wait and see how the security situation develops after U.S. forces pulled out of urban areas.

Al-Maliki said at the start of the day's ceremony that the government would "offer security protection, offer all guarantees for their investments and offer all the facilities needed to ensure the success of this process."

Two consortiums submitted offers for the Rumaila oil field, which holds 17.8 billion barrels in crude reserves. British giant BP PLC and China's CNPC made up the first consortium while U.S. giant Exxon Mobil and Malaysia's Petronas comprised the second.

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