Iraq Seeks $38 Bn To Boost Oil Output.

Iraq is seeking $38 bn of mainly foreign investment to boost crude oil output, but talks with international oil companies (IOCs) to attract the capital are still in initial stages. This was disclosed recently by the powerful head of the Iraqi Energy Council, Deputy Prime Minister Ahmad al-Chalabi.

Chalabi said: "We want the fields to produce as quickly as possible with due regard for reservoir management. But the talks are not advanced at all. Any contracts that Iraq negotiates will have to be approved by [the next] parliament [which will be elected on Dec. 15] and will be subject to public discussion".

Chalabi said Baghdad was making efforts to invite IOCs to invest so that Iraq can regain its 2.8m b/d pre-war levels of oil production. Chalabi on Nov. 24 told state-run Al-Iraqiya TV: "Iraq has the ideal conviction that its current production should reach up to three times to be 6m b/d within four years". He said this can only be realised through foreign investments.

Iraq's present output is still below the 1990 Gulf War levels which exceeded 3m b/d. Iraq and Russia recently began resolving controversy surrounding oil contracts the two countries signed under Saddam Hussein. Visiting Moscow, Iraqi Foreign Minister Hoshyar Zebari on Nov. 22 said: "The Iraqi Oil Ministry and Russian companies are holding negotiations on the future of previously signed contracts". He said examining contracts signed with Russia will be high on the agenda of Iraq's new government, which will be formed on the basis of parliamentary elections to be held on Dec. 15.

Finance Minister Ali Abdul Amir Allawi on Nov. 25 told a press conference that Iraq's budget for 2006 will not allow Baghdad to continue importing fuels from its neighbours worth $500m per month. Domestic fuel prices are to rise from the beginning of 2006.

Iraqi Oil Minister Ibrahim Bahr ul-Uloum expects the country's crude oil production to reach nearly 2m b/d by end-2005. He told a recent conference: "Iraqi oil production is now running at 1.8m b/d", after having declined to 1.7m b/d earlier last month, to technical problems and falling power generation. Bahr ul-Uloum said Iraq's capacity of almost 2.4m b/d was not being fully exploited due to insurgent attacks on pipelines and production problems in the south of the country.

Capacity, he added, would climb to 2.6m b/d by end-2005, with exports to average around 1.7m b/d, against 1.3m b/d in October. Capacity will climb over the next two years to 3.5m b/d. The director general of the Oil Ministry's Economics and Finance Directorate, Radhwan al-Saadi, said its current focus was downstream, where the government wants "the private sector to be involved". Two major oil refineries are to be built in the country (see Downstream Trends).

The Iraqi government is committed to cutting subsidies and is to announce a steep reduction and a schedule for an end to them later this month. The Iraqi cabinet has already decided to raise fuel prices two- to three-fold from the end of December to curb the growing black market and help reduce the country's budget deficit.

The cabinet has agreed to increase the price of super gasoline to 150 Iraqi dinars (10 US cents) per litre from IQD50 and that of regular gasoline to IQD50 from IQD20. Gasoil would be raised to IQD30 per litre from IQD10, kerosine to IQD10 from IQD5 and a cooking gas cylinder to IQD500 from IQD250.