Prior to the toppling of Iraq's Ba'athist regime, Iraq reportedly had negotiated several multi-billion dollar deals with foreign Oil companies mainly from China, France, and Russia. Deutsche Bank estimated that $38 billion worth of contracts were signed on new fields -- "greenfield" development -- with potential production capacity of 4.7 million bbl/d if all the deals came to fruition (which Deutsche Bank believed was highly unlikely).

 

Now, the legal status of these agreements is up in the air, increasing the uncertainty level for companies interested in doing business with Iraq. Besides legal/constitutional issues, companies are also looking for a relatively stable security situation, a functioning government, and other conditions to be in place before they move heavily into the country. In early June 2005, Iraq Oil Minister al-Uloum announced the formation of an inter-ministerial committee to review oil contracts signed under the Saddam Hussein government.

Reportedly, dozens of companies have signed MOUs (memoranda of understanding) with Iraq, mainly on EPC (engineering, procurement and construction). The MOUs generally cover the training of Iraqi staff (often for free), consulting work, and Reservoir studies (also often for free).

 

The MOUs generally are considered to be a way for oil companies to show their interest in future Iraq work, gather technical data, and to demonstrate their capabilities. In addition, the MOUs could help companies establish relationships that could be useful in the future, when Iraq is ready to start awarding major oil and gas development projects.