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BP maps out Iraq strategy

World's No. 3 oil company is getting ready to work on the world's second largest reserves of crude.

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LONDON, England (Reuters) -- British oil company BP PLC has put a team to work on a strategy for its future in oil-rich Iraq, people familiar with the situation said Tuesday.

The news follows a meeting in London at the weekend where Iraqi exiles and U.S. state department officials agreed that international oil firms should take a leading postwar role in reviving Iraq's oil industry.

Oil companies and the U.S. and British governments have been unwilling to talk openly about the future of the oil industry in Iraq.

They fear fueling accusations that the invasion of the country by U.S. and British troops was motivated by a desire to get western hands on the world's second largest reserves of crude.

But concerns are already growing among European companies that a U.S.-dominated postwar administration will give first bite of the Iraq oil cherry to its own companies.

In February this year, as war clouds gathered, BP Chief Executive John Browne voiced those concerns, saying: "The most important thing for us is that there remains a level playing field when it comes to consideration for activity in Iraq."

And BP, the world's third largest oil company whose links to Iraq oil date back to the 1920s, does not plan to be caught off guard if oil contracts and concessions are to be handed out.

"There has been a team working on Iraq for some time now in BP," said one source. Another said the team's activities were largely limited to "exchanges of information and keeping a watching brief on developments."

Peter Nolan, head of long-term business development, is in charge of the team, a handful of executives, engineers and Middle East veterans.

Nolan answers directly to Tony Hayward, chief executive of exploration and production.

Until earlier this year, Nolan was in charge of new development in the Middle East.

BP would not comment on the role of Nolan's people, but a spokesman said: "If sanctions were lifted and the government of Iraq wanted foreign investment, we would look at the opportunity just as we would anywhere else in the world."

Well firefighting and repair contracts are already being signed by U.S. government officials with smaller oil services companies.

But industry insiders expect that early postwar Iraq oil contracts for the big companies like BP, Exxon Mobil, Royal Dutch/Shell and others will be limited to staff secondment and consulting roles similar to those they have taken on in Kuwait since the first Gulf War in 1991.

Historic links

BP has been less active than some of its rivals in seeking access to Iraq in the years leading up to the U.S.-led invasion, analysts say.

BP CEO Browne reminded reporters last year that BP (BP: down $0.07 to $38.58, Research, Estimates) has some useful data on Iraqi oil fields.

In 1920, the Anglo-Iranian Oil Company, as BP then was, became the largest shareholder of the Iraq Petroleum Company (IPC), a cartel of western oil companies that sought to carve up the energy resources of Iraq and those of other Middle East nations. The company remained a core member of IPC for the next 40 years, exploring and developing production in Iraq.

In 1961, five years after Anglo-Iranian was renamed British Petroleum, a revolutionary government in Iraq cancelled most of the IPC's concessions, leaving only some producing oil fields in its hands. In 1971 the remaining production concessions were nationalized too.

The stake that Britain bought in BP to ensure fuel oil for its Navy in the First World War has been long since been sold, but the company's links to the U.K. government, now the main ally of the United States in its war with Iraq, remain close.

CEO Browne was recently appointed to Britain's House of Lords by Prime Minister Tony Blair. Anji Hunter, a former close aide of Blair's, is BP's director of communications.

Copyright 2003 Reuters. All rights reserved. This material may not be published, broadcast, rewritten, or redistributed.

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