For some international companies it will be the first time in
more than a year that they will do business directly with Iraq.
Companies such as ExxonMobil of the US, shied away from directly
buying Iraqi oil under the UN's oil-for-food programme as Washington
stepped up its rhetoric against the Saddam Hussein regime.
But Iraq has some major obstacles to overcome - most notably the
lack of security - before its oil exports can again flow on a
sustained basis.
Mohammed al-Jibouri, head of Iraq's oil marketing, acknowledged
the tender was a one-off sale. Even so, the sale of 8m barrels of
Kirkuk crude oil from Iraq's storage tanks at the Turkish port of
Ceyhan and 2m barrels of Basrah Light from the tanks in Mina al-Bakr
on the Gulf is an important step - and not only because it is
expected to generate more than $250m.
Emptying the tanks will allow Iraq to restore some crude oil flow
through its pipelines towards the ports. But how much oil will be
available will depend on Iraq's ability to get engineers - many of
whom fear being kidnapped, robbed or having their cars stolen on the
way to the fields - back to work.
In the meantime looters have damaged offices in Basra and
numerous oil installations around the country.
The tender, for which bids are due by June 10, switches the
transaction back to dollars - the international currency of oil
sales - despite the greenback's recent fall in value. Saddam Hussein
in 2000 insisted Iraq's oil be sold for euros, a political move, but
one that improved Iraq's recent earnings thanks to the rise in the
value of the euro against the dollar.
The sale comes less than a week before the Organisation of
Petroleum Exporting Countries is due to meet in Doha, Qatar, to
discuss whether to reduce its output allocation to make room for
Iraqi exports.
Despite the tender, analysts do not expect Opec to cut production
as any significant level of sustained exports from Iraq remains
months away.
"The market is still a bit sceptical about when Iraqi oil is
coming back, because there doesn't seem to be much control over the
looting taking place," said one trader in London on Thursday.
Some analysts estimate Iraq will not return to its pre-war export
level of about 2.7m barrels a day until the end of the year.
Issam Chalabi, a former Iraqi oil minister, says it could take
Iraq as much as three years and $5bn of investment to achieve 3.5m
b/d, the volume Iraq pumped before its 1990 invasion of Kuwait.
The benchmark oil futures on the New York Mercantile Exchange on
Thursday rose 22 cents to $30.27 a barrel. The trader said the rise
reflected uncertainty about Opec's intentions next week at the Qatar
meeting, and the prevailing tightness in the US oil market, as
commercial stocks rise slowly off 27-year lows.
