AMEC, the engineering and construction company, has formed a joint venture with Fluor, a leading US construction group, to bid for contracts to rebuild Iraq’s oil industry.

Amec is the first UK company to set up a partnership with the sole purpose of bidding for primary contracts to rebuild the oil infrastructure in postwar Iraq. The two firms together have 100 years’ experience of operating in the Middle East.

The US Army Corps of Engineers is expected to ask for bids shortly.

Sir Peter Mason, chief executive of Amec, said: “This joint venture will be able to benefit from the strong relationships that each parent company has with all the major multinational and national oil companies in the region.”

The payoff for Amec and Fluor could be huge. Iraq has the world’s second biggest oil reserves after Saudi Arabia.

According to industry sources, a contract with an initial value of about $700 million (£443 million) is about to be awarded. However, over the next few years the value of reconstruction contracts could be worth billions of dollars.

Amec is already well known to the US Defence Department after it helped to rebuild the Pentagon in Washington after the September 11, 2001, terrorist attacks in the US. The company is the world’s leading builder of foul-weather oil platforms.

Fluor, based in California, owns 51 per cent of the joint venture company, with Amec owning the rest. The shareholdings were structured to help to get round US rules restricting primary contracts to American companies.

Other British companies that have talked of winning contracts in Iraq are now expected to make firm links with American peers so that they can bid for US contracts.

Amec and Fluor said yesterday that should they win the US Army Corps’ rebuilding contract, they expect to employ a significant number of Iraqis.

They are also prepared to train many non-oilfield personnel for long-term careers in the industry.

Fluor and Amec first began working together in 1998 and are at present working on joint projects in the US, Canada, Angola, South Korea and the Philippines.

The US Agency for International Development, which controls about $2.5 billion in rebuilding and humanitarian work, has already been subject to fierce lobbying from British firms and officials. It has now said that foreign companies could get as much as half of the reconstruction work in subcontracts.

The US Government has already granted primary contracts to several companies to rebuild Iraq’s devastated infrastructure.

Last week, Bechtel Group, the private engineering and construction company, was awarded contracts worth up to $680 million to help to rebuild Iraq’s electricity system, water supplies and other key infrastructure.

Amec shares slipped 2¼p to 232½p.