Its Urgent to get to Iraq's oil

International companies have waited years to tap into Iraq's vast oil wealth and now Iraqi officials are working feverishly to make that happen soon.

There is growing apprehension about the cost of rebuilding the country with the price of crude, the nation's major source of revenue, nearing five year lows. Iraq must produce more oil and it is foreign oil majors that have the wherewithal to do that. Iraq recently sweetened the terms: increasing ownership percentages for foreign oil companies and making it easier to meet production targets. But the government wants production to begin quickly. The Associated Press reports that the country is now requiring any oil company that signs a contract to begin operating in the country within six months. Though low crude prices have not diminished interest in Iraqi oil, negotiations between the two sides have lingered over security concerns and the absence of a national law regulating Iraq's oil industry.

Prime Minister Al-Maliki said the government would form a committee to oversee development of the country's devastated oil industry and increase exports. He said Iraq must also work quickly to diversify its economy to cushion future spending from a drop in oil prices. But right now, the onus is on ramping up oil production, and fast. As violence has declined in Iraq, so to has the price of oil worldwide. The Iraqi government relies on oil sales for more than 90-percent of its revenue. Falling oil prices have reduced the projected 2009 budget from $79 billion to $64 billion and have forced Iraqi officials to slash rebuilding plans by 40-percent. U.S. officials have repeatedly warned any significant slowdown in reconstruction could imperil the security gains that have reduced violence in Iraq to a five-year low.

It remains to be seen how international firms will respond to Iraq's new carrot and stick approach. Iraq hopes the contracts-scheduled to be awarded in June-will boost oil production by 1.5 million barrels per day within four years. Iraq currently produces about 2.4 million barrels daily. The companies are bidding on long-term service agreements that would pay them fees depending on production levels.