Iraq-Iran standoff at oil-well site ends

Also, Baghdad OKs Shell-Petronas deal

— A standoff between Iraq and Iran over a remote oil well ended peacefully Sunday as Iranian forces pulled back from the disputed site. In Baghdad, officials approved a preliminary deal with an international group to develop one of Iraq’s most prized oil fields.

The peaceful end of the standoff at well No. 4 at the southern al-Fakkah oil field capped a tense weekend between Iraq and Iran, uneasy allies that were once at war. But the preliminary deal between Iraq’s Oil Ministry and a partnership run by European giant Royal Dutch Shell PLC and Malaysia’s state-run Petronas was also an important step for Baghdad as it jockeys for a larger piece of the world’s oil profits.

Congratulating Shell-Petronas on the deal to develop the southern Majnoon oil field, the country’s senior deputy oil minister, Abdul-Karim Elaibi, said the unrelated well standoff, which sparked diplomatic and security concerns, had not scared away the investors.

“Their presence here today ... is a great evidence that there is no relation with what happened in the borders with our neighbor, Iran,” Elaibi said.

The contract must still be approved by Iraq’s Cabinet before it takes effect. It was signed shortly after Iraqi soldiers escorted about a dozen oil workers back to the al-Fakkah well, which armed Iranian forces had vacated overnight, several government officials said.

Iraqi soldiers planted the Iraqi flag on the well where Iran’s flag had flown during the dispute that began Thursday. Dozens of Iranian soldiers, however, lingered at a checkpoint not far away.

The well, which is not producing oil, sits about 50 yards from the Iran-Iraq border. Both countries claim parts of the oil field, and the border itself is under dispute in some places - a problem highlighted by Iranian officials who said the No. 4 well was on Iranian soil.

Officials in Baghdad and Tehran said diplomatic talks about the disputed border would continue. The al-Fakkah well is about 200 miles southeast of Baghdad and has an estimated 1.5 billionbarrels in reserves.

It’s not clear why a group of armed Iranians seized the well Thursday night, and officials offered differing accounts on whether they were soldiers or civilians acting on their own. Political analysts said Iran appeared to be reasserting its dominance over the area’s oil reserves.

In Tehran, the office of Iranian Foreign Minister Manouchehr Mottaki said he and his Iraqi counterpart, Hoshyar Zebari, discussed the case in a phone conversation late Saturday. Mottaki said Iran was committed to talks with Iraq through a joint border committee and blamed “foreign elements” for causing disruption, according to a statement on his office’s Web site.

Adm. Mike Mullen, chairman of the Joint Chiefs of Staff, said Sunday that he does not assume Iran’s brief seizure of an Iraqi oil well is part of an orchestrated plan in Tehran.

Mullen, the top U.S. military officer, said the oil-well seizure adds to his concerns about Iran’s intentions toward neighboring Iraq and the rest of the world.

“I worry a great deal about ... Iran and destabilizing as opposed to stabilizing,” he said.

The well seizure was just one of the latest security incidents to face Iraq’s fledgling oil industry. In the north, an overnight bomb attack outside Mosul halted pumping on Iraq’s largest crude-oil export line, Oil Ministry spokesman Assem Jihad said.

It was not immediately clear whether pumping for the Kirkuk-Ceyhan pipeline had restarted Sunday night. The line has been attacked repeatedly by insurgents and can carry more than 400,000 barrels of oil a day.

Iraq is believed to have the third-largest reserves in the world, after only Saudi Arabia and Iran, and the problems experienced with Iran over the weekend are small in comparison to the kidnappings, shootings and bombings that scared investors away just a few years ago.

“They know the oil is there - all they’ve got to do is bring it out of the ground,” said Robert Ebel, a senior energy and national security adviser at the Center for Strategic and International Studies think tank in Washington. “Oil companies have been handling risk issues all of their lives. And unless you’ve got senior managementthat is risk-adverse, there is not going to be any hesitancy about going into Iraq.”

The Shell-Petronas deal was widely viewed as a boon to Iraq’s postwar recovery. It was one of 10 deals that Iraq awarded to foreign investors in two bidding rounds aimed at increasing the country’s oil production to 12 million barrels a day within six years.

Iraq has not raised output to even close to pre-2003 levels and, with outdated technology, is limping along at roughly 2.5 million barrels per day. That’s well short of Iraq’s goal of joining the ranks of other heavyweight members of the Organization of Petroleum Exporting Countries.

Iraq’s oil minister said Sunday that he does not expect the country will achieve any “significant” increase in oil production before 2012, even after signing deals with international oil companies this year.

While contracts signed this year with foreign firms could boost the country’s production capacity to 11 million barrels a day, it will take years for this new output to come on stream, Oil Minister Hussain al-Shahristani said at a press briefing in Luanda, Angola.

Shell-Petronas won the right to develop the southern Majnoon oil field, which holds 12.5 billion barrels of estimated reserves.

Prime Minister Nouri al-Maliki, a Shiite who is running for re-election in March, was silent throughout the al-Fakkah well dispute. He had no plans to discuss it with Iranian parliament Speaker Ali Larijani at a Cairo meeting of Islamic countries’ lawmakers, said spokesman Ali al-Dabbagh.

Sunni lawmakers Sunday called the oil-well standoff an example of Iran trying to smother Iraq’s ascent in the oil world, a not-too-subtle attack on al-Maliki’s silence on the issue. Opponents have accused al-Maliki of being too cozy with Tehran, although other prominent politicians are much closer to the neighboring country.

Information for this article was contributed by Lara Jakes, Nasser Karimi and Anne Gearan of The Associated Press and by Grant Smith of Bloomberg News.

Front Section, Pages 1 on 12/21/2009

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