07/30/2009 05:12 am ET Updated May 25, 2011

Big Oil Ready To Bid On Iraqi Oil Fields

Major international oil and gas companies have flown in representatives to Baghdad in preparation for tomorrow's bidding on Iraq's decadent oil fields, the country's first major tender since 2003. Thirty-two foreign firms, including Exxon Mobil, Chevron and Royal Dutch Shell, are competing for six of Iraq's largest oil fields and two gas fields, which could hold more than 115 billion barrels of oil. Major oil companies have not serviced Iraq's oil fields in 30 years, after former President Saddam Hussein threw them out of the country when the industry was nationalized. Oil companies could win access to one of the world's largest remaining untapped reserves, but they also face a climate fraught with logistical and hostile concerns.

According to Reuters, many firms are taking extra precautions to protect their investments. For example, the companies will employ service companies and contractors to minimize their exposure to risk.

They will bypass the dangerous streets of Baghdad by building airstrips near remote oil sites and flying their personnel in and out of the country from there. "Security is a huge expense but then at big oil companies we are used to that. We work in some difficult places, like Nigeria. I would estimate security will add 10-15 percent to the project," said a senior executive from an international oil company planning to bid but unauthorised to speak publicly.

Kurds, who have signed oil deals with firms that Baghdad has rejected as illegal, have in turn condemned the central government's contracts for fields in the disputed Kirkuk region.

Reuters also reports that earning the trust of the Iraqi people will be one of the most important challenges the oil companies must overcome. The news organization quotes Hugh McManners, a spokesman for the security firm Erinys, that many Iraqis " believe foreign firms will plunder Iraq's oil." Erinys was hired by the U.S. government in 2003 to protect Iraq's oil infrastructure.

The Wall Street Journal reports the oil field contracts could be worth billions of dollars, and the Iraqi government must approve of the 20-year service contracts before drilling can commence.

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