http://www.forbes.com/feeds/ap/2009/...ap6602591.html

BAGHDAD -- The first international bidding process in more than 30 years for development rights to some of Iraq's oil fields has finished, with only one field being awarded.

Iraq had offered six oil and two gas fields in a landmark auction the government hoped would help boost output to 4 million barrels per day and generate cash it desperately needs for postwar reconstruction.

But the bidding round Tuesday faltered quickly as companies demanded terms far greater than what the government was willing to provide.

There's a popular misconception that China's oil deals in Iraq means that the Chinese are somehow beating Western companies to the jackpot. The reality is that the terms being offered are so restrictive that only the Chinese - who have demonstrated a very high risk tolerance in this and other markets - are interested. Given the terms being offered, this is not about oil companies fighting for the privilege of working in Iraq, but about the Iraqi Government struggling to find anyone willing to invest on its terms.

Another common misconception is that if Chinese oil companies do the investing the oil will automatically go to China, if US oil companies do the investing the US gets the oil, etc. This is simply inaccurate: the oil will be sold to the highest bidder no matter who pumps it. All oil consuming countries have an interest in seeing Iraqi production increase, but as long as that oil comes onto the market it doesn't matter at all where the oil actually goes. If Iraqi production went up to 5 mbpd the US would benefit from lower prices even if every drop produced in Iraq went to China.

Unfortunately for all concerned, that kind of production increase is not likely under the investment terms now being offered.