David R. Baker / San Francisco Chronicle – 2008-04-12 23:34:12

http://www.sfgate.com/cgi-bin/article.cgi?f=/c/a/2008/04/11/BU6G103LI1.DTL

West al-Qurna, Iraq (April 11, 2008) — Chevron Corp. confirmed Thursday that it is negotiating with the Iraqi government for a contract to help expand production at a major oil field near Basra.

The company plans to work with French oil giant Total to improve operations at the West al-Qurna field in southern Iraq, said Chevron spokesman Kurt Glaubitz.

The negotiations had been widely reported earlier this year, but San Ramon’s Chevron has not confirmed them until now. The company took the step after Total’s chief executive officer publicly discussed the proposed deal Thursday at an oil industry conference in Paris.

“We just want to be consistent with them and confirm that what they’re saying is accurate,” Glaubitz said.

All the large, international oil companies are believed to be negotiating similar deals with the Iraqi ministry of oil.

Iraq holds what may be the world’s third-largest oil reserves, and petroleum is the country’s only significant export. But Iraq’s state-run oil industry suffers from aging, outdated equipment and frequent sabotage. It also has been hamstrung by a deep division in Iraqi politics.

The oil ministry wants foreign companies to invest in Iraq, using their money and technical expertise to develop more fields and expand production. But the country’s legislature has been unable to pass an oil law that would set ground rules for foreign investment and spell out how oil revenue would be shared among the country’s provinces.

The widespread belief among Iraqis that the United States ousted Saddam Hussein to seize the country’s oil makes political compromise difficult. Many Iraqis fear foreigners will gain too much control over a resource they consider a national treasure.

The contracts under discussion appear to be a way for the ministry to skirt the political deadlock. Although details remain sketchy, the contracts would be limited, running for only two years. And they would not involve development of new oil fields – the real prize sought by international oil companies.

Instead, the companies would work with the Iraqi operators of existing oil fields, looking for ways to increase the amount of oil pumped from each location. That could mean analyzing the geology of each site or bringing in advanced drilling techniques.

E-mail David R. Baker at dbaker@sfchronicle.com.