A fall in the number of attacks across Iraq has emboldened a growing list of companies, including ArcelorMittal, Royal Dutch Shell and Cairn Energy, to explore opportunities in the resources-rich country for the first time since the invasion.

Southern Iraq, where British forces have been based since 2003, is an area of particular interest, sitting on one of the world’s biggest oil and gas reserves. It also has a strong industrial and agricultural base and the country’s only port.

In a reminder of the dangers that have kept investors at bay, a bomb exploded yesterday in the path of a convoy of Western contractors in the main southern city of Basra. No one in the convoy was hurt.

Michael Wareing, co-chairman of the Basra Development Commission, a body set up with help from Britain’s Department for International Development to encourage investment in Basra, said that foreign interest had surged since an Iraqi-led offensive in the spring to wrest control of the city and its surrounding province from Shia militiamen. A push by the Iraqi Government to promote joint ventures in a number of state-owned companies, with a view to possible future privatisation, is also attracting attention.

“We have 17 companies that we are actively supporting in terms of regular meetings and site visits,” Mr Wareing said. Among them is ArcelorMittal, the world’s biggest steelmaker. Mr Wareing, also head of KPMG International, said that the Luxembourg-based company had submitted a proposal to the Iraqi Government worth more that $1 billion (£563 million) to invest in a state-owned steel company in Basra.

“ArcelorMittal confirms it has held preliminary talks with the Government of Iraq with a view to contributing to the reconstruction and rehabilitation of vital infrastructure within the country,” the company said. “Much of this redevelopment will require an increase in steel production. Iraq faces enormous challenges in this regard and ArcelorMittal believes it can make a valuable contribution to this effort. The Middle East has attractive growth potential for the group.”

Shell is also keen for a piece of the action. Last month, the company signed a multibillion-dollar natural gas deal in southern Iraq with the Iraqi Government, the second big energy contract agreed with a foreign company since the invasion.

Cairn Energy, the Edinburgh-based oil exploration company, is looking at opportunities in the south, according to Mr Wareing. He said that some British banks were also keeping open their options for trading in the region.

The US Department of Defence is also encouraging foreign investors to take advantage of the opportunities in Iraq. Brigadier-General Jefforey Smith, deputy commander in central Iraq, has hosted a visit by executives from Global Hyatt Corp, Morgan Stanley and CF Industries Holdings. A lull in the fighting has freed his troops to escort visiting executives to factories and to meet local leaders.

They also helped to facilitate the sealing of an agreement last week at a dilapidated factory complex in Iskandariyah, south of Baghdad. Soldiers stood guard as a senior official from Cummins, an American producer of generators, signed a letter of intent with representatives from two Iraqi state-owned manufacturing companies. The deal is aimed at paving the way for Cummins to repair generators in Iraq using the man-power and factory facilities of the State Company for Automotive Industries (SCAI) and the State Company for Mechanical Industries.

Asked why Cummins had chosen to enter Iraq now, Dennis Heathfield, managing director of its Middle East distribution branch, said: “Improvements in the security environment and the political environment have made it possible for us to look at it.”

Amer al-Najm, director-general of SCAI, said that his company was to hold talks with Mercedes-Benz and Scania, the carmakers, about a possible joint venture.

Ali al-Dabbagh, a government spokesman, emphasised the importance placed on wooing foreign, private investment. “We have more than 23 years of knowledge gap,” he said. “We need to liberate all the activities from the domination of the Government.”

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