Guess what? It wasn't about oil....

Americans are not getting many oil contracts in Iraq...

Iraq's ravaged oil industry is on the verge of a major reconstruction and experts now believe that by the decade's end it could rival the world's top oil producers.

But major challenges lie ahead.

Iraq's success depends in large part on a mosaic of international investments.

The oil ministry has awarded contracts to at least a dozen firms from around the globe to develop its oil fields and boost production in the next seven years to over 11 million barrels a day.

That's a five-fold increase, and would put it on par with top producers Russia and fellow OPEC member Saudi Arabia.

"They have the oil in the ground," said James Placke, a senior associate at Cambridge Energy Research Associates who specializes in the Middle East. "It's getting it out that's always been the problem."
The payoff

Iraq sits on at least 115 billion barrels of proven oil reserves, the world's third-largest behind Saudi Arabia and Canada. And analysts believe there could be much more, given that the country's western desert hasn't even been explored.

But Iraq's oil industry has suffered from decades of mismanagement, sanctions and war.

For the last several years, violence and internal squabbling over distributing oil revenues has largely kept international oil firms out of the country. That changed last summer, when BP and China's CNPC won a bid to develop the huge Rumayla oil field near the southern city of Basra.

Initially the Rumayla field was the only one that attracted the attention of international oil firms. Iraq's royalty terms seemed too strict, said Colin Lothian, a senior analyst at the energy consultants Wood Mackenzie.

The Iraqis had hired a top-notch negotiating firm that ensured over 90% of the oil revenues would flow right back to government coffers, one of the highest royalty rates in the world. This is a potentially huge windfall for Iraq, which derives over 75% of its economic output from the relatively small 2.4 million barrels a day of oil it pumps now.

But those terms might be tough for the oil companies.

"They will completely and entirely fund the development of those fields, and get very little profit in return," said Lothian.

Still, faced with declining fields elsewhere and the need to continually find oil in order to support a healthy stock price, the big oil firms have finally agreed to those harsh terms.

This December a dozen other companies bid on at least nine major fields in Iraq.

The firms are not just from Anglo-American-led coalition countries that toppled Saddam Hussein, like Exxon (XOM, Fortune 500), Shell (RDSA) and BP (BP). Russia's Lukoil, China's CNPC, and Malaysia's Petronas, among others, are also in the game.