Outlook Yesterday's return to Iraq by big oil didn't quite live up to its billing. There was no shortage of razzmatazz, with bids at an auction of development rights unveiled live on state television. But more than half the oil and gas fields up for sale did not find a buyer.
This is not because the fields in question are unattractive to the world's largest energy companies. On the contrary, 30 years after Iraq nationalised its oil industry, many international companies are very keen to return to the country, which has substantial proved reserves as well as huge potential for exploration.
Rather, the failure to sell some of the fields reflects the narrow terms on which the development rights were offered for sale. And that reflects the huge pressure the Iraq government is under to get these deals right.
The dilemma for Iraq is that the country does not have even a fraction of the cash required to get its oil facilities up to a standard where they will deliver their potential. It thus needs international oil companies to pay for their development. Equally, though, Iraq doesn't want to simply hand over the country's biggest asset – and best hope of a prosperous future – to Western interests.
The good news for Iraq is that big oil needs it more than vice versa. BP, for example, the successful bidder in one of the auctions yesterday, agreed to accept a fee of just $2 a barrel in return for the right to help develop the Rumaila field.
Iraq needs to hold its nerve. In a world where proven resources are dwindling and new oil finds are becoming scarcer – and tougher to exploit – it can afford to play hardball with companies moaning about the terms on offer. Big oil will eventually come back to the table.