Iraqi deputy prime minister says international oil companies key to raising production

(AP) A top Iraqi official called for partnerships with international companies to boost his country's oil industry on Sunday, saying Iraq's emergence as a "secure petro-democracy" could quell rampant sectarian violence.

Deputy Prime Minister Barham Saleh, a Kurd, conceded disputes between local officials and the central government over who controls oil proceeds were one of many obstacles to making improvements. But he said he was hopeful that oil would be a "unifying force for Iraqis rather than a resource to fight over."

He spoke of Iraq emerging as a "secure petro-democracy" with the strength to put an end to the violence that threatens to tear the country apart.

"I don't underestimate the gravity of the situation in Iraq," Saleh said during a U.N.- and U.S.-sponsored Iraq donor conference in the Emirates capital of Abu Dhabi. "We are in a very critical situation."

Iraqi leaders are nearing agreement on a long-awaited hydrocarbon law that could usher in huge investments by foreign companies in Iraq's oil sector _ and eventually rescue the embattled country from deepening chaos, Saleh said.

The deputy prime minister said he expected the law setting ground rules for managing Iraq's huge petroleum reserves would be approved in parliament by year's end.

"This will open Iraq's oil sector for investment," Saleh said. "We know what it takes. It takes partnerships with international oil companies."

Foreign oil companies, with their huge investment clout and technology, are best placed to quickly modernize Iraq's oil sector and meet the country's goal of doubling the current crude production of 2.5 million barrels per day by 2010, Saleh said.

But the absence of a legal framework governing investments and ownership of the country's oil resources has hampered foreign investment in the sector.

Iraq's oil infrastructure has been under repeated attacks from insurgents. The industry also suffered during the 1990s when the country under Saddam Hussein did not have access to state-of-the-art technology or engineering know-how.

Big oil companies have told the U.S. government they are willing to send crews to Iraq to explore and pump oil _ regardless of the violence _ as long as there are legal ground rules for their participation, said U.S. Deputy Treasury Secretary Robert Kimmitt.

"The oil companies have told us they need to know what the rules of the road are," said Kimmitt, President Bush's special envoy for the Iraq donor talks.

Currently, Iraq's oil production is overseen by the country's Ministry of Petroleum and two state-run oil companies, a centralized management system left over from the regime of Saddam Hussein that Saleh said "has proven to be a disaster."

"Iraq needs investment. Iraq needs to send a strong signal to the international community about investment in oil," the deputy prime minister said. "We need to push liberalization and open our markets."

Saleh, from the autonomous Kurdish region in northern Iraq, acknowledged that "differences remain" among those negotiating a hydrocarbon law, particularly on determining whether the resource is controlled by regional governments or Baghdad.

Kurds in the north and some Shiite Muslims in southern Iraq _ Iraq's two chief oil regions _ want regional control over oil production and revenues. But Iraq's Sunni Muslims and much of the Baghdad government want to maintain national control over Iraq's petroleum resources.

Iraq's proven oil reserves stand at about 115 billion barrels, the world's third largest after Saudi Arabia and Iran.

Sunday's Abu Dhabi meeting brought together officials from the U.S., Europe, Japan, Korea and Iraq's Arab neighbors along with the U.N., World Bank and International Monetary Fund to discuss The Compact for Iraq, a five-year plan to ensure Iraq's government has funds to survive and enact key economic reforms.

The talks were expected to continue Sept. 18. In New York, Iraqi Prime Minister Nouri al-Maliki and U.N. Secretary-General Kofi Annan were to discuss Baghdad's political reforms, while global finance ministers discuss Baghdad's economic proposals in Singapore on the sidelines of a World Bank and IMF meeting.