US says Iraq oil output target "optimistic"

BAGHDAD, July 18 (Reuters) U.S. Energy Secretary Sam Bodman cast doubt today on an Iraqi government target to raise oil production to three million barrels per day by the end of the year and called for steps to attract foreign investment.

''The (oil) minister has talked about three million barrels a day by the end of the year,'' Bodman said.

''My own sense is that may be a little optimistic but I think directionally there is a real opportunity there,'' he told a news conference.

Iraq's goal represents an increase of around a million barrels per day over current output.

Bodman stressed that a proposed oil law regulating foreign investment must be passed to improve the country's energy sector crippled by guerrilla violence after years of poor maintenance and stringent sanctions under Saddam Hussein.

''The country of Iraq will need to pass a new law, the so-called hydrocarbon law, which will set the terms under which international companies can make investments,'' said Bodman.

He noted that top officials, including the oil and electricity ministers, were optimistic that the law would be passed by parliament.

Oil Minister Hussain al-Shahristani had said he hopes parliament would approve the legislation by the end of the year.

No big oil companies have arrived in Iraq to sign what they had expected would be lucrative deals after a U.S.-led invasion toppled Saddam in 2003 and raised hopes that the country's abundant natural resources would deliver prosperity.

A lack of clear investment guidelines and insurgent violence, including bombings of oil pipelines, have kept them away from the third biggest oil reserves in the world.

The semi-autonomous Kurdish regional government in the north has signed oil deals with foreign companies, bypassing the central government and raising fears such agreements could fuel communal tensions that have pushed Iraq close to civil war.

The Sunni Arab community, which forms the backbone of the insurgency concentrated in resource-poor central Iraq, fears it will be left behind as the Kurds, as well as the Shi'ites in the oil-rich south, cash in on exports and exploration deals.

That was one of the sensitive issues that Bodman discussed with top officials facing mounting pressure to generate more oil sales to rescue the economy and improve electricity supplies.

''There is a tension between the establishmnent of total federal control over all oil and gas assets in the country or on the other hand there would be a delegation to some of the regional authorities,'' he said.

Bodman said the Iraqi government's goal was to raise the price of gasoline to regional levels by the middle of next year.

The move could help fight black market sales and widespread oil corruption that has deprived state coffers of millions of dollars.

REUTERS PKS PC2104