Written question asked by Colin Challen (Labour) on Tuesday, 10 January 2006, in the House of Commons. It was due for an answer on Monday, 16 January 2006. It was answered by Kim Howells (Labour) on Monday, 16 January 2006 on behalf of the Foreign and Commonwealth Office.

Iraq

Question: To ask the Secretary of State for Foreign and Commonwealth Affairs what advice his Department has given to the Iraq Oil Ministry on the introduction of production sharing agreements.

Answer: The contractual arrangements for future oil exploration and production are a decision for the incoming Iraqi Government and the Government have not sought to influence this decision. The Foreign and Commonwealth Office did support a 2003 independent study which set out the full range of possible contractual financing arrangements to allow the rehabilitation and development of the Iraqi oil industry.Under the outgoing Iraqi Transitional Government, the Ministry of Oil was clear that the option of concluding Production Sharing Agreements would be one of a range of contracts that might be needed to help redevelop the oil industry. This is because after decades of isolation, Iraq has weak technical and managerial capacity combined with an ageing infrastructure with severely outdated production facilities. Furthermore, there has been no explorations for new fields since the 1980s and limited post-2003 investment and poor maintenance. Given the state of the infrastructure, and the US$20 billion needed for reconstruction of the oil industry, it is highly unlikely that the Iraqi Government will be able to fund investment in the oil industry itself. Without the needed investment the oil industry will not be able to fuel the required sustainable economic growth in Iraq.The Government reiterates, however, that the decision as to whether to conclude a Production Sharing Agreement will be for the Iraqi Government to decide.

Secondary information