BAGHDAD (Reuters) - Washington is advising Iraq (news - web sites) on establishing a state company to take over management of the oil sector by July as U.S.-led occupation forces hand power to new Iraqi government, a U.S. officiWe are helping set up a mechanism that allows them to have a state oil company but also allows a significant outside investment into the industry," said Robert McKee, the outgoing oil chief in the U.S.-led administration of Iraq.
McKee, who will be replaced by Mike Stinson from Monday, said Iraq had no choice but lure international investment even if the oil industry remained in state hands.
He said Iraq needed tens of billions of dollars to double output to five million barrels per day in the next five years.
"The industry has been underinvested in the last 30 years. There is not money available in Iraq to modernize it and take advantage of the potential," McKee said.
Iraq has been working on re-establishing the Iraq National Oil Co, which ran the sector from 1964 to 1987.
Former Iraqi president Saddam Hussein (news - web sites) dissolved the company and replaced it with specialized agencies under the control of the oil ministry.
It remains to be seen whether Iraq can offer foreign firms deals they favor, such as production sharing, while the sector remains in state hands.
A new constitution due to be promulgated next year is expected to affirm Iraqi sovereignty over the oil resources.
al said on Sunday