Posted Wed Jul 2, 2008

Five years after the US-led coalition stormed into Iraq there is set to be another western invasion.

This time it is the world's biggest oil companies leading the charge, 36 years after Saddam Hussein kicked them out.

The oil giants are seeking access to Iraq's rich crude reserves, Australian companies BHP Billiton and Woodside are among them.

The Iraqi government wants to make up for the lost opportunities under Hussein's rule and has the ambitious goal of doubling Iraqi oil production to more than 4 million barrels a day within five years.

Peter Zeihan, an energy analyst at geopolitical intelligence group Stratfor, says there is plenty of incentive for the big oil companies.

"They have the largest, easiest reservoirs to tap, they're very close to existing export points, there's infrastructure in place for over double the amount of oil that currently is being produced in Iraq," Mr Zeihan said.

"When Iraq does ultimately open up in a big way and allow greenfield investments, every single oil major in the world wants to be part of that play. And if that means signing deals that you're not exactly thrilled with today, so be it."

The Iraqi government insists the companies that win contracts must take on a local partner who in turn must have a minimum 25 per cent stake in the deal.

In an attempt to fast track oil production the government will award six contracts on a no-bid basis, to a handful of mainly US companies.

The move has been criticised by some US law-makers but State Department spokesman Tom Casey insists Iraqi arms were not twisted.

"The United States was not involved in any decisions to award contracts, to make determinations of what kinds of contracts would be offered," Mr Casey said.

Still the mad rush for Iraqi oil has reignited debate over why the US invaded Iraq in the first place.

Rick Barton of the Washington based Centre for Strategic and International Studies says gaining access to the Iraqi oil fields was always a key strategic motivation.

"Of course oil is important. It matters to the world, it is one of the true assets of this region," Mr Barton said.

"And to be more matter of fact about it and then to make it clear to people that really the more oil that is produced and exported, it's better for the world markets and it's better for the Iraqis."

"Instead of people being coy about it, my feeling is that total transparency makes it - takes away the argument."

The Iraqi government hopes to sign most of the oil deals by the middle of next year.

Adapted from a report by Washington correspondent Michael Rowland for AM