NEWSMAKER - Shahristani, architect of Iraq's oil future

BAGHDAD/LONDON Sat Dec 18, 2010 5:08pm IST

Hussain al-Shahristani, Iraq's oil minister speaks during an oil symposium at the Oil Ministry in Baghdad July 18, 2010.  REUTERS/Saad Shalash/Files

Hussain al-Shahristani, Iraq's oil minister speaks during an oil symposium at the Oil Ministry in Baghdad July 18, 2010.

Credit: Reuters/Saad Shalash/Files

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BAGHDAD/LONDON (Reuters) - Iraq's incumbent Oil Minister Hussain al-Shahristani, who senior sources say will keep his job in Iraq's new government, faces an uphill struggle to achieve ambitious oil output targets and allay fears within OPEC over the scale of its plans.

A nuclear scientist by training and a survivor of torture under the regime of Saddam Hussein, Shahristani's strength of mind helped him to forge deals with foreign oil firms that could quadruple Iraq's oil output.

Iraq has ambitious plans to boost production capacity from 2.5 million barrels a day to 12 million bpd over the next six or seven years, but sceptical analysts say 6-7 million bpd is a more realistic target.

Even that goal, however, would give it much more weight in OPEC, currently dominated by the world's top oil exporter Saudi Arabia, and prompt some hard negotiations in the oil producers' cartel about the level of Iraq's output quota.

Within Iraq, obstacles to Shahristani's plans include a lack of security, decades-old laws, crumbling infrastructure and sectarian divides.

"He was the right person to be in charge during the bid rounds because he was not going to be bought by anybody," said Bill Farren-Price of Petroleum Policy Intelligence.

"But is he the right person to be in charge for the implementation phase, where you need someone who understands the industry and gets things done?"

For international oil companies, his presence in the oil ministry amounts to a pledge that contracts he agreed will be honoured in the absence of any formal guarantee as Iraq still lacks a new oil and gas law.

For the Kurds, who have signed oil deals that Baghdad has declared unconstitutional, he is enemy number one.

"Shahristani looks like a guarantor of continuity from the point of view of the companies investing in the south of Iraq," said Samuel Ciszuk, senior energy analyst at IHS.

"(He) has built himself a reputation as a capable technocrat and ally to (Prime Minister Nuri) al-Maliki, but has also become the nemesis of Iraq's Kurdish factions for pushing hard to extend national control over the oil and gas resources in the Kurdistan region."

JAILED, TORTURED UNDER SADDAM

Born in 1942, Shahristani studied in Britain, Russia and Canada and became senior scientific adviser at Iraq's Atomic Energy Commission, where he was arrested in 1979 by Saddam Hussein's agents for his activities against the regime.

By his own account, he was stripped, hung from the ceiling by his wrists and subjected to electric shocks and beatings. He has said he recited mathematical formulae to help him survive.

After seven months in jail, he was taken in front of Saddam's half-brother, Barzan al-Tikriti, who offered to free him if he would work on Iraq's secret nuclear weapons programme.

"Anybody who refuses to serve his country does not deserve to be alive," Shahristani quoted Tikriti as telling him.

"I agree with you that the person must serve his country but what you are asking me is not a service to the country," Shahristani replied, he said in his book Escaping to Freedom, which he wrote in 1999. He was eventually sentenced to 20 years and spent 11 in prison, some in solitary confinement.

Shahristani escaped the notorious Abu Ghraib prison as bombs fell during the 1991 Gulf War and fled with his children and Canadian wife to Iran where he ran a group helping Iraqi refugees.

He returned to Iraq in 2003 and turned down a chance to head the interim government before being made oil minister in 2006.

KURDISH DEALS

Those who worked with Shahristani have divergent opinions of a man who, although lacking experience in the industry, took a tough line with firms queuing up to develop some of the world's most promising oilfields.

Politicians and oil officials said he also took a firm stance in fighting corruption when he took over the oil ministry, and has been praised for leading a largely transparent auction process. A devout Shi'ite Muslim, he lives a simple life and in some ways has not been altered by his time in office.

"I met Mr. Shahristani in 2006 in London and he wasn't smiling then. That was before we won any contracts," said a foreign oil executive. "I met him this year again in Baghdad after we won the contracts and he's still not smiling."

Critics say he is not receptive to advice.

The central government and the regional Kurdish government have been at loggerheads for months over deals Kurdistan signed with foreign oil firms. Shahristani has repeatedly said the contracts are illegal and has made many enemies.

Kurdish officials hope a breakthrough in talks to form a new central government will lead to a deal to pay the firms and restart exports from their region, despite doubts Shahristani will change his stance.

"When he says no, it is no," said an oil official who works closely with him. "They will reach a compromise, but he will not back down completely from what he said before."

OPEC POLICY

Shahristani has said he expects an OPEC output limit of no less than that of the group's most influential member, Saudi Arabia. Emerging from the shadow of war and sanctions, Iraq is exempt from the targets the Organization of the Petroleum Exporting Countries uses to set supply levels.

But as Baghdad embarks on unprecedented development, OPEC will at some point need to bring Iraq back into the fold to stop millions of barrels of new supply from destabilising markets.

The rise of Iraq as an oil power would rattle Riyadh, already suspicious of the new-found political supremacy of Iraq's Shi'ite majority since the fall of Saddam, a Sunni.

Iraq's development is also likely to stoke tensions with Iran, OPEC's No. 2 producer. Higher output from Iraq could lower oil prices and steal market share from others.

Shahristani has said there was no need for OPEC quota talks before output reaches 4 or 5 million bpd, which could be in two or three years' time.

"The issue of an Iraqi OPEC quota will clearly be of strategic importance to Iraq," said Ciszuk. "I think we should expect negotiations to become quite complex when we get there, but then that depends on what Iraq's potential will look like at that point."

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