BP seen slow to spend on Rumaila before Iraq vote

* First phase of contract does not need much investment

* BP, CNPC expect to invest $10-$20 bln in Rumaila

BAGHDAD, Nov 3 - British oil major BP Plc and its Chinese partner CNPC will be slow to pour investment funds into Iraq's supergiant Rumaila oilfield until they know the outcome of next year's election, energy experts said.

The 20-year service contract that the firms signed with Iraq on Tuesday allows them to do just that. BP and CNPC are committed to spending $300 million in the first 33 months, a small amount for the oil majors and a comfortable length of time in which to guarantee some production increase.

"BP will use the Rumaila deal as propaganda to bolster its position globally, but on the ground it will be different," said Mahmoud al-Jubouri, an oil expert with Iraq's South Oil Company, which has run Rumaila and will be BP's partner.

"They will try to reduce spending, fearing possible bad surprises in the future."

One of the possible bad surprises lurking in the path of the deal that BP and CNPC have already signed and those that other international oil companies are expected to clinch soon is the outcome of parliamentary elections in January.

There is no guarantee that the government of Shi'ite Prime Minister Nuri al-Maliki will be re-elected nor that its successor will honour the contracts.

But Muhammad-Ali Zainy of the London-based Centre for Global Energy Studies said he expects BP and CNPC to move forward with investment, which may help with any possible problems.

"It would really play in their favour if they had invested their money and could say they had acted in good faith," he said.

COLLECT THE FRUITS

Modern hydrocarbon legislation setting out ground rules for foreign investment in Iraq has been held up for years in parliament by rows over the division of Iraq's oil wealth.

In its absence, the Maliki government is relying on laws dating back to ousted dictator Saddam Hussein to justify its view that oil deals only need to be ratified by the cabinet. Lawmakers disagree, saying deals need parliamentary approval.

"They (the oil firms) are not on firm ground," Jubouri said.

"They will wait until they are assured that the deal is recognised by the next government. They will then feel that they are walking on solid ground."

BP and CNPC have pledged to ramp up production from Rumaila, a supergiant field with 17 billion barrels in reserves, to 2.85 million barrels per day from just over 1.1 million bpd now.

Alex Munton, an analyst at Wood Mackenzie, said the firms would start with small operations such as rehabilitation of existing facilities and drilling some wells to boost output.

The initial target set out in the contract is for a 10 percent increase. That should be relatively simple to achieve through minor repairs or improvements to Rumaila's ageing infrastructure, Iraqi experts said.

"During the first months, BP and CNPC will not do much work, because they have to raise output in Rumaila by 10 percent in three years and that is an easy job for them," said former oil minister Esam al-Chalabi.

"The first phase of the Rumaila contract does not need a lot of cash or much effort. South Oil Company did a good job recently, but BP and CNPC will collect the fruits."