by Jay Deshmukh2 hours, 54 minutes ago
The United States urged Iraq to adopt a new hydrocarbon law that would enable US and other foreign companies to invest in the war-torn country's oil sector.
Iraq, which has had decades of socialist economy, must "pass a new law, a new hydrocarbon law under which international companies will be able to make investments in Iraq," said US Energy Secretary Samuel Bodman during a visit to Baghdad.
Bodman said a liberalized hydrocarbon sector would help Iraq realize "its very considerable potential with the benefit of investments from international community."
The US official, who met Iraqi leaders including premier Nuri al-Maliki and oil and electricity ministers, said the Iraqis had shown enthusiasm for such a law.
"Each of them were optimistic of passing that law by the parliament and they hope to pass such a law by end of this calendar year," Bodman told reporters.
"We got every indication that they were willing and also felt a necessity to open the sector. It is something that they were quite enthusiastic about ... Iraq has enormous wealth and it needs to take advantage of that."
The International Energy Agency (IEA) in a report released last week said only 10 percent of Iraq's oil reserves has been explored and 60 percent of proven reserves were in undeveloped oil fields, making it an attractive destination for global oil explorers.
Iraq's oil industry was nationalized in 1972 before Saddam came to power and has massive patriotic significance in the country. In fact following the US-led invasion many Iraqis suggested that coalition forces were only interested in stealing Iraq's oil.
Under Saddam there was no foreign investment in the oil sector, but in his final years a French-Russian joint venture was signed though never implemented due to UN sanctions.
The bulk of Iraq's proven oil reserves, among the largest in the world, are in the country's north and in the Shiite dominated southern regions.
But security concerns, corruption, sabotage and political uncertainty have virtually made further development of the vital sector impossible.
Iraq's oil output touched 2.08 million barrels per day in June, the highest since October 2004, and exports reached 1.64 million barrels per day.
The rise in June output was largely due to improved security on the northern pipeline to Ceyhan in Turkey.
But sustained insurgent attacks on oil pipelines and deteriorating infrastructure make further increases difficult without massive investment.
Iraq in 2005 lost oil revenues worth more than six billion dollars following attacks on its oil infrastructure.
Bodman accepted that though US oil majors were interested in coming to Iraq, they were apprehensive due to violence, which saw more than 14,000 people killed in the first six months of the year, according to a UN report released on Tuesday.
"The question they (companies) ask is we are interested, but we can't think about investing until, first there is security and second there is a hydrocarbon law that will delineate the rules of the road," Bodman said.
"Neither is sufficient, both are necessary."
Last month US President George W. Bush also called for developing the oil sector that could help Iraq's beleaguered population.
"There's some unbelievably interesting exploration opportunities and the new government is going to have to figure out how best to lease the people's lands in a fair way," said Bush.
Iraq's nothern Kurdish region has however begun attracting investments in the oil sector.
The accord comes following the April announcement of the discovery of an oil field in the Zakho region of Kurdistan near the Turkish border -- the first in the Kurdish Autonomous Region.
"Kurdistan has been the one encouraging outside investments and Kurdish people are more aggressive on this front," said Bodman who also met the region's minister for natural resources Ashti Horami in Baghdad.