Shell Loses Out in Contest to Develop Iraq's Kirkuk Oil Field

Shell has failed in a controversial attempt to win the first post-war contracts to develop oilfields in Iraq.

Hazim Sultan, Iraq's oilfield development director, said five companies had been shortlisted to evaluate the potential of the huge Kirkuk field in the north. A similar number are still in the race to study the Rumaila oilfields in the south. "I hope we will award the contracts for both projects within a month," he told Reuters.

Mr Sultan would not identify those companies still in the running for the deals. The issue is highly sensitive because of claims that the US and British invasion has been a "war for oil" that would only benefit the major energy companies.

Both Tony Blair and the energy industry itself insisted there was no economic self-interest at the heart of the decision to oust Saddam Hussein.

Both Shell and BP submitted bids for the work and the Anglo-Dutch group admitted last night that it had failed and BP said it had yet to hear.

"It's a decision for the ministry of oil. We respect that and we have no further comment to make," said a Shell spokesman. BP played down the significance of the work, arguing it was merely "reservoir engineering studies" that others believed was only worth $5m (£2.7m) per contract.

Britain's biggest company denied there was any change in its former position of being wary about going into Iraq.

"This is technical work that could be done outside of Iraq. We would not be considering putting our own people into Iraq or becoming involved in a major scheme with the current air of uncertainty," BP said.

Companies are being asked to provide even more details about how they would rehabilitate the 77-year-old Kirkuk field, which is currently producing 500,000 barrels a day compared with the 800,000 it did in the past.

While the current round of contracts involve only technical studies, major oil companies are eager to get a foot in the door whatever the political dangers might be.

They are hoping that later on - under a democratically-elected government in Baghdad - they may gain access to Iraq's oil riches, which are among the most abundant in the world.

BP has always believed it had a head start on some of the opposition because it has knowledge of Iraq's geology as a result of holding major concessions there before nationalisation in the 1960s.