British Petroleum PLC and Royal Dutch/Shell Group have each agreed to buy 10 million barrels of Iraqi oil under new long-term contracts to be offered by Iraq since the end of the war, the companies said Wednesday.

Shell received a written offer from Iraq's State Oil Marketing Organization, the state-run monopoly that controls Iraqi crude exports, on Wednesday for 10 million barrels under a term contract. BP said it has agreed to a similar contract.

A spokesman at the BP headquarters office in London told Xinhua that under the long-term contract, BP would buy 5 cargoes of oil starting from August to December, but he said he did not know where the company would ship the new oil. Neither has Shell decided on the destination of its oil shipment.

Both companies would each have 2 million Basra Light crude loaded per month on tankers at Iraq's Gulf export terminal of Minaal-Bakr, the companies said.

Oil production in southern Iraq has increased substantially in recent weeks thanks to improved security at oil fields, pipelines and other facilities there.

The deals come on top of purchases the companies made earlier this month in an auction held by Iraq's State Oil Marketing Organization.

The two British oil giants had each won the right to purchase 2 million barrels of Iraqi crude oil put up by Iraq's State Oil Marketing Organization for tender earlier this month, along with deals of the same amount won by the US energy group ChevronTexaco Corp. and Swiss trading firm Taurus.

BP shipped the first cargo of oil to the United States. The deal was the first sale of crude pumped in Iraq since the end of the Iraq war.

It is understood that the marketing organization also agreed this week to sell 6 million barrels under shorter spot contracts to ChevronTexaco, Petrobras of Brazil and Switzerland's Vitol.

SOMO's introduction of so-called term contracts for selling fixed quantities of oil over a longer period is a significant step forward for Iraq and its postwar reconstruction, observers here believe.

Iraq has the world's second-largest proven oil reserves, and term contracts will generate steady income for the first time since the US-led invasion ousted Saddam Hussein's government.

(Xinhua News Agency July 24, 2003)