IRAQ: USAID Provides Adviser to Iraq Government on Oil Law

The law, which the soon-to-be-formed Iraqi governmentis expected to formulate, is seen as a critical piece of legislation for foreign investment in the country. However, many non-governmental organizations have warned the U.S. against exerting any influence on the management of the Iraqi oil industry.

At the request of the U.S. State Department, the agency is providing a petroleum advisor to Iraq from February to June through its contract with BearingPoint, USAID spokesman David Snider told Dow Jones Newswires in an e-mail.

"The advisor will be providing legal and regulatory advice in drafting the framework of petroleum and other energy-related legislation, including foreign investment," he wrote. He added the advisor would work with Iraqi experts and those from the Iraq Reconstruction Management Office, which coordinates the U.S. reconstruction program in the country.

BearingPoint and the State Department both referred calls to USAID.

Greg Muttitt, an expert with U.K.-based non-governmental organization Platform, criticized USAID's involvement, saying decisions regarding the Iraqi oil industry shouldn't be influenced by other countries.

However, Snider stressed that any advice would only be provided at the request of the Iraqi government.

Muttitt said a BearingPoint report issued in December 2003 on the Iraqi oil industry favored foreign participation as the most efficient way of developing the sector.

The report, a copy of which was obtained by Dow Jones Newswires, says that closing oil exploration and production to foreign participation "has generally led to both production and fiscal difficulties."

Muttitt criticized the BearingPoint report for using Azerbaijan as an example of how the Iraqi oil industry could attract large amounts of foreign investment.

He said Azerbaijan's oil revenue management suffers from "a lack of transparency and good government."

BearingPoint declined to comment on the report.

A number of international oil majors have expressed interest in investing directly into Iraq's oil exploration and production.

Royal Dutch Shell PLC (RDSB.LN) has approached the Iraqi oil ministry to explore options for a contract to help the country double output at a field in the oil-rich south, oil officials have previously told Dow Jones Newswires, but the company hasn't commented.

In 2001, when Saddam Hussein was still ruling the country, Royal Dutch Shell said it held discussions on access to the 2-billion-barrel Ratawi oil field in southeastern Iraq.

Iraq aims to become one of the world's leading oil producers, with output exceeding 5 million barrels a day.