ANALYSIS - Flop to some Iraq oil sale may be victory to others

By Suadad al-Salhy and Ahmed Rasheed

BAGHDAD (Reuters) - To oil executives, Iraq's first auction of energy contracts since the U.S. invasion was a giant flop. To Iraqis, basking in a renewed sense of sovereignty and nationalism, it may turn out looking like a victory.

Iraq's embattled Oil Minister Hussain al-Shahristani did not look particularly pleased on Tuesday after Iraq secured just one deal to develop an oilfield out of the eight massive oil and gas fields it had put out to tender.

Despite the lure of the world's third biggest and largely underexplored oil reserves, energy firms balked at the cheap price Iraq was willing to pay them for helping it boost lacklustre oil production so that it can raise the billions it needs to recover from six years of war.

But by standing up to global oil majors and refusing to give up Iraq's prized oil wealth at any cost, Shahristani may end up bolstering his position, some Iraqi politicians say.

"Yes, we set tough contractual terms with foreign oil firms, but all that is to make it clear to all Iraqis we are keen to safeguard Iraqi oil revenues," Shahristani told reporters after bidding for the oil and gas fields had concluded.

The auction coincided with the pullout of U.S. troops from Iraqi cities under a bilateral security agreement, the first step toward a full U.S. withdrawal by the end of 2011. That has fuelled a sense of national pride as Iraqis start to believe they can throw off the shackles of a foreign occupation.

Having staked his ambitions for increasing Iraq's oil output on successfully attracting foreign expertise and capital into the country, the lack of deals at the auction has prompted questions about Shahristani's future as oil minister.

Only a BP-led group managed to secure a contract, for Iraq's biggest oilfield, Rumaila.