Iraq oil deals 'by end of August'

The oil is there, but so are ongoing attacks on pipelines

Iraq's interim government is expected to award the first three post-war oil production contracts by the end of August, industry sources say.

Irish firm Petrel has confirmed it has put in bids for all three contracts on offer so far, making the final lists.

However, Shell told the BBC it had declined to enter the tendering process for at least the first of the three.

The big firms are said to be put off by the small size of the current deals, and the ongoing security situation.

Jim Finn, company secretary at Petrel, told BBC News Online it had submitted its three tenders between March and mid-May.

The scope and contract format are not compatible with our aspirations for long-term risk-reward contracts Shell

"We have tendered and we are fairly confident," he said.

Although Mr Finn said the security situation was obviously not ideal, he said Petrel continued to have both a Baghdad office and people on the ground in Iraq.

Attacks

The first three Iraqi oil projects up for grabs are for developing the Khurmala Dome field in the north of the country, the Suba-Luhais field in the south, and the smaller Hamrin field, again in the north.

Shell said it was initially interested in taking on Khurmala Dome, but turned it down because it was not happy with the terms of the offer.

"We obtained a copy of the tender but the scope and contract format are not compatible with our aspirations for long-term risk-reward contracts," said a Shell spokesman.

A spokesman for BP said it has not made a bid for any of the first three contracts.

The Khurmala project is thought to call for investment of $100m (£54m), Suba-Luhais $150m and Hamrin $80m.

Many other oilfield development projects are expected to be put out to tender in due course.

Iraq has the world's second biggest oil reserves after neighbouring Saudi Arabia but development has been held back by years of sanctions.

The interim Iraqi government wants to increase current production levels of about 2.5 million barrels a day to more than the pre-war level of 3 million barrels.

However, ongoing attacks on pipelines continues to hamper progress.