NEWS

BAGHDAD, April 30 (Summary of Reuters Article) - Iraqi authorities rejected an oil development financing proposal submitted by a U.S.-led banking consortium. The proposal offered $1.4 billion in financing to fund oil projects. Rejection of the financing plan raised more doubt about Iraq's ability to sustain oil production. Reuters quoted a "well-connected Western oil executive" as saying Iraq's oil officials "had no other option" but to reject the financing offer because "Foreign investors will not come and invest in oil field development until there is an energy law they could rely on." The financing proposal involved mortgaging oil exports. Iraq is struggling to finance oil projects in order to help double production to five million barrels per day in the next five years. Iraq's oil revenue will remain under U.S. control until a "representative" government is established as required under a 2003 United Nations resolution. Most of the oil revenue in the 2004 budget has been used to pay government salaries so far. Engineers say more wells are becoming unusable from lack of maintenance and power to inject water. Crude oil pumping capacity is also weak. Lack of security in Iraq is forcing private companies away from investing in Iraq's oil industry. It is still uncertain why Iraq rejected the financing plan after it won support from key politicians. U.S. oil officials in Iraq opposed the financing plan, complaining it was too costly. Private funding of Iraq's oil ministry projects is separate from U.S. government oil projects in Iraq. The U.S. government has spent $2 billion on Iraq's oil infrastructure so far, with most of that money going to Halliburton.