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Exxon Mobil [XOM
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], British Petroleum [BP
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], Royal Dutch Shell [RDS'A
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]and Total [TOT
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]are reportedly near a deal with the Iraqi Oil Ministry that will grant the oil giants "no-bid" contracts for access to the country’s oil fields. This will mark the first time these firms have had commercial access to Iraq since the U.S. invasion in 2003.
But don’t look for the entry of the oil majors into Iraq to help depress oil prices that have surged over $130 a barrel. Energy analyst Greg Priddy of Eurasia Group points out that these are short-term service contracts of one or two years being awarded to the four Western oil firms, not production-sharing agreements.
Big oil isn’t booking more reserves from Iraqi oil fields, where current production is around 2.5 million barrels per day. Instead, the major oil giants will be helping to rebuild devastated energy infrastructure in Iraq, hoping to get a upper-hand on bids for future contracts.
"That’s important symbolically, but not practically" for the global oil market, says Christ Edmonds, founder of FIG Energy Partners. "No one is going to flip a switch and see oil gushing out of Iraq… pragmatically that may take years."
Indeed, Priddy estimates Iraqi oil production won’t go over 3 million barrel a day for at least four to five years.
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Iraqi Oil Field Map |
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