Border standoff ends as Baghdad moves on separate deal to develop lucrative oil field

Iraq says Iranian troops left disputed oil well

BAGHDAD — 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.

Together, the events highlighted the economic and diplomatic challenges facing Iraq as it tries to expand its reach in the global oil market.

In Iraq’s southern Maysan province, soldiers escorted about a dozen oil workers back to well No. 4 on the al-Fakkah oil field after Iranian forces withdrew overnight. Iraqi soldiers planted the Iraqi flag on the well where Iran’s flag had flown during the dispute that began last Thursday.

“The problem is solved now,” Abdul-Karim Elaibi, Iraq’s senior deputy oil minister, told The Associated Press. Diplomatic talks over the disputed border were continuing, he said.

Well No. 4 stopped producing oil in the 1980s as a result of the Iran-Iraq war, but “Iranian harassment” started in 2007 after Iraq worked to get the well operational again, he said.

Both Iran and Iraq claim parts of al-Fakkah as their own. Located about 200 miles (about 320 kilometers) southeast of Baghdad, the oil field has an estimated 1.5 billion barrels in 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 — echoing earlier Iranian accusations that foreign media had tried to undermine ties between the two countries, according to a statement on the Web site of his office.

Meanwhile, in Baghdad, Iraqi officials signed a preliminary deal with an oil consortium led by European giant Royal Dutch Shell PLC and Malaysia’s state-run Petronas.

The deal, which still must be approved by Iraq’s Cabinet, is critical to the country’s postwar recovery. It is aimed at boosting Iraq’s oil exports and bringing in money to help rebuild after the 2003 U.S.-led invasion and decades of neglect and international sanctions under Saddam Hussein.

Iraq has not been able to raise output to even close to pre-2003 levels and, with outdated technology, is limping along at roughly 2.5 million barrels per day.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.

Ten deals that Iraq awarded to foreign investors in bidding rounds held earlier this month and in June are expected to help increase the current production to 12 million barrels a day within six years.

Shell-Petronas won the right to develop the southern Majnoon oil field — with estimated reserves of 12.5 billion barrels — during Iraq’s second round of postwar bidding, which offered 15 oil fields earlier this month.

Under the 20-year contract — if it is ultimately approved — two companies will be paid $1.39 for each barrel produced, with a 35 percent income tax applied on the fee.

The contract stipulates that the companies will pay 75 percent of the expenses from the sales, with the rest being paid by Iraq. But since Iraq is cash-strapped, Shell-Petronas will pay all the expenses, and be reimbursed with oil instead of money.

The two companies plan to raise production to 1.8 million barrels a day from the current 45,900 barrels per day.

The Shell-Petronas deal was one of only seven awarded to international consortiums during the two-day bidding round that began Dec. 11. International companies largely shied away from oil fields in the country’s most violent regions.

In a reminder of the tenuous security, an overnight bomb attack on the country’s largest crude oil export line halted pumping, Oil Ministry spokesman Assem Jihad said.

It was not clear whether pumping had restarted on the Kirkuk-Ceyhan crude oil pipeline following the Saturday night attack near Mosul. Export levels were not immediately affected, because of sufficient levels of crude oil in storage, Jihad said.

The northern pipeline, which has been attacked repeatedly by insurgents, can carry more than 400,000 barrels of oil a day.

Associated Press Writers Sinan Salaheddin in Baghdad and Nasser Karimi in Tehran contributed to this report.