Iraq's government hopes that a draft hydrocarbons law it agreed on February 26 will be approved within the next two months depending on parliamentary approval of key details, in particular how the country's natural resources and revenues are going to be managed and distributed.
A proposed federal oil and gas commission will include both members of central and provincial levels of government but this implies a dilution of the existing oil ministry's role in decision making.
Independent consultants are also suggested for the new council but their possible influence on decisions is unclear. Revenue from oil sales is to be disbursed to communities according to population levels in the regions.
For this distribution to occur an accurate census will be needed to decide where, and in what numbers, where Iraq's population is located. A format for contracts and details of how revenues will be collected and mechanisms for their distribution also needs to be decided.
Nevertheless, there remains big international interest in Iraq's oil given the highly favourable costs of extraction which are as low as $1a barrel. Observers feel that the country's vast reserves are the last great reservoir of cheap oil in the world.
Iraq's Oil Minister Hussain al-Shahristani is talking up the country's potential with claims that Iraq has 200 billion barrels of unconfirmed crude reserves in addition to confirmed reserves of 112 billion barrels. This would place Iraq ahead of Saudi Arabia in global petroleum importance.
Iraq's Oil Ministry has invited 15 companies to provide proposals by the end of May for exploring in the south of the country where almost all of Iraq's richest oilfields are located
The UAE's Crescent Petroleum has already conducted studies to develop Iraq's southern Ratawi oilfield with a potential output of 200,000 b/d and is also studying other areas between Basra and the Kuwait border.
Majors such as BP, Shell, Exxon, ConocoPhillips, Total, Russia's Lukoil and China's Sinopec are observing the situation cautiously. BP has been looking at the southern Rumaila field and Shell is looking at Kirkuk's fields.
ConocoPhilips has hedged its bets by taking an 11 per cent equity stake in Russia's Lukoil which has also assigned to the US company a 17.5 per cent interest in Iraq's giant West Qurna field that Lukoil acquired from Saddam but was unable to exploit because of UN sanctions.
There are suggestions that agreements made by the old regime with oil companies from Indonesia China, India for exploration of smaller fields in the south central and broider areas with Kuwait may be upheld.
Saddam's regime offered lucrative production sharing contracts which were also offered initially in the first oil law draft by the present administration. Such arrangements now seem to have been dropped in favour of service and exploration contracts with more risk for companies.
With outside help Iraq's oil production could recover rapidly with a potential output eventually of 10 million b/d. However it will take a remarkable transformation in the security situation as well as advantageous contracts for the oil majors to return.