LONDON, Oct. 21 - The very risk and uncertainty that have made the international oil companies wary of going into Iraq has attracted small, aggressive engineering, drilling and contracting firms to the country.
"Like any market, people will take opportunities where they can," said Norman Davidson Kelly, the president of Tigris Petroleum, which is working on two projects in Iraq, including an evaluation of fields in Maysan Province in southeastern Iraq, with Shell and BHP Billiton.
"The fact that the big companies are concerned means that the smaller ones can come in," Mr. Kelly said. Tigris Petroleum has half a dozen people in Baghdad who collect data and coordinate with the Iraqis on behalf of the Shell-BHP venture.
While Iraq, with the world's third-largest reserves of oil, represents an irresistible opportunity for small companies - and their interest may help stabilize the country's faltering oil production - their involvement is not enough, politicians and oil experts say. Without billions of dollars in investment from conglomerates, Iraq seems poised to miss out on what is shaping up as the biggest oil boom in decades.
The small companies, some represented in Iraq by just one person, are footing hefty bills for travel and security in the hopes of winning a piece of Iraq's business. Some have signed the first paying contracts with Iraqi officials since the fall of Saddam Hussein's government more than two years ago, though the total dollar amount of the contracts is less than $1 billion, oil specialists say.
With attacks on pipelines and workers showing no signs of waning, these modest contracts may be the only business Iraq does with foreigners for some time.
Major companies like Shell, Chevron and BP have offered to study oil field data from outside the country, or to send oil ministry employees out of Iraq for training. Security fears, they say, have stopped them from sending in employees from Europe or the United States.
"The problems are so overwhelming that people are just not sure how to solve them," said an executive from a large oil company, who spoke on condition of anonymity because he hopes to do business in Iraq.
Oil production in Iraq has declined to less than 2 million barrels a day in August from 2.6 million barrels a day in January 2003, before the American-led military action, and little improvement is expected through next year.
The country expects "refining and production to continue to be constrained through 2005 and 2006, to say the least," Thamir Ghadban, the head of the Iraqi oil ministry until January, told industry executives late last month at a conference in London. The industry needs $20 billion in investment over the next five or six years to improve production, he said. Many experts do not anticipate a sizable increase in Iraq's oil output until the end of the decade.
Rather than earning money from its oil fields, Iraq is having to spend about $250 million a month to import products like gasoline and is diverting money intended for repairs to increase security. Sabotage, faulty repairs and inadequate oversight and investment in projects are the biggest factors in the production decline.
More than half a dozen attacks were carried out in September alone on pipelines, oil ministry buildings and oil wells, and several ministry employees have been killed in recent months. In August, rebels fired a mortar at the oil ministry headquarters in Baghdad.
The country's proposed constitution, meanwhile, provides an unclear foundation for investment. It directly addresses only oil that is being extracted from "current fields," which is to be administered by the federal government, not oil that will come from planned fields, or the reserves that specialists predict may be found in areas where planning has not even begun. It is also contradictory, implying that oil will be under federal control in one section and regional control in another.
Giving control of oil policy to regional authorities would make the area a less stable place to do business, specialists predict. "We are going to see weaknesses, and authorities not acting properly in terms of trying to operate or develop the oil fields," said Muhammad-Ali Zainy, the senior energy economist for the Center for Global Energy Studies in London.
Even with the work of small oil companies, Iraq may lose out entirely on much-needed revenue that could have come from the recent price increases for crude oil, he said.
In the last year, little-known companies like Everasia from Turkey, Ironhorse Oil and Gas from Canada and Petrel Resources from Ireland have signed multimillion-dollar contracts to develop fields in Iraq. Others are putting in months of free technical work in anticipation of deals.
