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The Scramble for Iraq's 'Sweet Oil'
With proven oil reserves of around 112 billion barrels and up to another 150 billion barrels of probable reserves, Iraq is the greatest untapped prize for international oil companies.
Baghdad has refused to recognise contracts awarded by the Kurdistan regional government [EPA] To put that in context, if Iraq does turn out to have around 300 billion barrels of oil, it will rival the world's biggest producer Saudi Arabia - which has around 160 billion barrels of proven reserves.
So it is little wonder that giant international oil companies are lining up to get back into Iraq after the industry was nationalized in the 1970s and the oil majors were kicked out.
On June 30 major companies - including Exxon, Shell, BP and Total - will gather at Iraq's oil ministry in Baghdad for a two-day meeting to take part in the first bidding round for oil service contracts.
However, what the oil companies will be entitled to if they secure a contract has become one of the most controversial elements of the bidding process.
The companies want a long-term share of the oil they produce under a Production Sharing Agreement, which allows them to book reserves in advance and tell the market exactly how much oil they expect to produce.
This is exactly the type of contract that Iraqis in the oil industry are opposed to. They argue oil companies should be awarded Technical Service Agreements, meaning they will be paid solely to develop Iraq's oil fields.
Fayad al-Nema, general manager of Iraq's South Oil Company, has written to Hussein al-Shahristani, the Iraqi oil minister, outlining his company's objections.
Iraqi objections
"We in the South Oil Company, that is all of its leadership, reject the first bidding round because it is against the interests of Iraq's oil industry."
Al-Nema, and others, argue that it would serve the national interest better if foreign companies were brought in on a short-term basis only, until Iraqi firms are capable of managing and developing the oil fields themselves.
Oil workers' unions in Iraq have also spoken out against the contracts.
"The first round of the allocation of Iraq's oil contracts... have given huge advantages to the foreign companies"
Hassan Joumah, Federation of Iraqi Oil Workers' Union
Hassan Joumah, president of the Federation of Iraqi Oil Workers Union, says: "Unfortunately, there are many problems with the first round of the allocation of Iraq's oil contracts, which have given huge advantages to the foreign companies to invest in Iraq's oil.
"Giving such returns to foreign companies will put Iraq's economy in the hands of foreign companies."
The Iraqi oil workers gained some concessions including establishing joint operating companies.
Under this arrangement, international oil firms will not receive a share of Iraq's oil but they will be working in the country for the next 20 years with a 75 per cent stake in the operation.
Over the last two weeks, al-Shahristani has been forced to defend the terms of the contracts before parliament.
He argues that without outside help Iraq can not boost its oil production levels, warning lawmakers: "We will not achieve our desired goals and our country will fall behind."
However, the contracts on offer are not the only controversy surrounding the exploitation of Iraqi oil.
KRG dispute
Iraq's newest oil field is not in the desert of western Iraq or the barren landscape of the south near Basra. It is in the semi-autonomous region of northern Iraq which is controlled by the Kurdistan Regional Government (KRG).
The Norwegian company DNO has already excavated the Tawke oil field in this region.
Its owners proudly show off their new field and their enthusiasm is contagious; they have discovered the type of oil Iraq is renowned for - what oil experts here call "sweet oil".
It is easy to produce and costs less than $2 to get out of the ground. Within a couple of years they hope to be exporting 200,000 barrels per day from here.
But Iraq's federal government says contracts signed by the KRG are illegal and refuses to recognise them.
The world's biggest oil companies have avoided signing contracts with the KRG [AFP]
The main bone of contention is who controls Iraq's oil and gas reserves.
The Iraqi constitution should provide the answer, but conflicting articles in the document have exacerbated the power struggle between Baghdad and the KRG over the management of these resources.
Both sides have teams of lawyers and consultants arguing that the constitution gives them the right to sign contracts and manage the resources.
Falah Kadhim Al-Khawaja, an Iraqi oil expert in Amman, says the central government in Baghdad is right.
"Based on the constitution, there is a clause that says oil and gas is the property of the Iraqi people and the central government is responsible for the budget. So the Iraqi budget is based on oil and gas revenues. How can the central government plan without having control of oil and gas resources?"
Nevertheless, the KRG has pushed ahead and signed dozens of oil contracts with foreign companies.
Interestingly, the world's biggest oil companies, Exxon, Shell, BP and Chevron, have avoided signing contracts with the KRG.
They do not want to risk the wrath of the federal government, opting instead to wait for the most lucrative contracts for the super-giant fields in the rest of the country.
Until recently, the Tawke oil field was caught in the middle of the dispute.
Since early 2009, the oil field has been ready to begin exporting around 60,000 barrels a day. Instead, the KRG told DNO to delay exporting until it the conflict with Baghdad is resolved.
So DNO filled up its main exporting pipeline with water and waited.
Pipeline politics
At the end of May, the KRG gave DNO the go-ahead to begin pumping oil out of the country through the northern Iraq-Turkey pipeline.
However, the tension between Baghdad and the KRG is far from resolved.
Ashti Hawrami, the KRG's oil minister, accuses the federal government of being "afraid of good news".
"They are afraid [that] oil flowing from Kurdistan shows Baghdad in an even worse light. They failed and this will highlight their failure even more," she says.
This is the KRG's first foray into the oil-producing business and, as Hawrami likes to remind people, the regional authorities "do not want a single penny out of it".
The oil revenues will all go to the federal government and the KRG will receive its 17 per cent share of the national budget to manage its region.
Al-Shahristani, however, insists: "Any contracts for field development that is not approved by the federal government of Iraq has no standing with the Iraqi government and the oil companies have no right to work on Iraqi territory."
The pipeline politics are likely to continue unless a deal is reached between the two parties.
32 Comments so far
Show AllAt the rate our economy is fighting to stay the guzzler's economy with the Big O there to keep bailing it out, Iraq's oil fields will most likely peak before 2020 and that's not taking into account competition from other nations such as China and India. It would be much better if there were thousands of small businesses growing algae for oil which would in turn enforce conservation and fuel efficiency. Algae can deliver the chemical equivilant of light sweet crude oil and it's carbon neutral plus no drilling or fighting more wars for oil to rape off mother earth.
Algae can produce fuel? That's pretty neat, Max. How cost effective is it?
Algae can grow almost anywhere so it's not as if you can't do widespread production unlike our current fossil fuels being centered in states like TX, OK, LA, WV, AK. I don't expect algae for oil to be ridiculously "cheap" but maybe that will enforce conservation and fuel efficiency. It sure beats bombing countries for oil any day. If I were offered a green job related to algal oil production, believe me I'd take it.
Which would you prefer. A job with Exxon which is planning to corner the market on algae production, or a job with the state setting up a system to ensure that algae production remains in the hands of small independent farmers? Exxon will pay you three times as much mammon.
Just curious. Why the emphasis on who is doing the production?
I'd much rather choose the latter and here's why. I'm not just an ordinary programmer but play some role in helping out management. I would have a much better chance being a fair minded project manager working with the state and doing my part to proudly help small independent farmers than I would as just another Exxon employee. Of course, I'm in my 40s. If I were around 30, I might have chosen the former so that I could bide time and make plenty enough money to set up my own independent business to work with those small independent farmers.
Don't forget that cattails are four times more productive in producing alchohol than corn.
"The first round of the allocation of Iraq's oil contracts... have given huge advantages to the foreign companies"
"Giving such returns to foreign companies will put Iraq's economy in the hands of foreign companies."
MISSION ACCOMPLISHED!!!
I'm glad to see the Kurds have a place to call home! That's one good thing to come out of the Iraq occupation.
No one wanted to give them autonomy to live and practice their cultural ways after WW II. Turkey hunted them down with U.S. helicopters. Saddam had a genocidal champagne (Al-Anfal) to exterminate them. Iran was indifferent but somewhat more tolerant.
We don't hear much about them and they probably like it that way.
As far as oil deals, Iraq should pay for the development of their oil but not give rites to it! That opens the door for the lawyers to interpret and twist things. Keep it simple stupid!
Ah, the benefits of Imperialism: over a million Iraqi people killed, millions displaced, a country broken and fragmented, a couple of trillion of US taxpayer money gone, war-profiteer corporations receieve hundreds of billions, and now the Oil vultures are swooping.
The occupation continues and the free money keeps flowin, the kleptocratic system is strong as ever.
Iraq's large oil supply has been well-known to many of us for years, and is the main reason for aiding/abetting of 9/11 by the US gov't and the invasion of Iraq.
So, much of this article is not news.
true-sed. big oil capped iraq before it could add its oil to the market, and CAPPED iraq when SH began to bring it on. For big oil - it has always been about keeping Iraqi oil off the market, and keep the price up.
Seems we left them without enough money to develop their own OIL!
Maybe some big bank will lend them the money to restart the Iraqi National Oil Company.
They have good collateral!
Oh I forgot. THEY all work together for the benefit of THEMSELVES. No bank is going to go against the plan to get that sweet crude in the hands of the majors.
A drilling rig can punch a hole a day on a shallow well. A workover rig follows the drilling rig around to complete the well and it doesn't take long to produce lots of oil!
Seems a bank would buy into that in a heartbeat!
More drilling and pollution when we need to be getting away from just that.. Give us and the earth a break. Why not save those oil fields at least for sometime way in the future, when there may be a much greater need and the earth is breathing better.
That's my feelings exactly!
We may see oil prices fall if Iraq comes online. Will we conserve and develop renewables or glut on it?
With the MSM in control of the U.S. mind set, we will party on it!
All this puts the timing of the pullback of American troops from Iraq cities in a new light.
You see, the price of a trillion dollar and a few human lives to invade and occupy Iraq was just a small price to pay. Now you will all reap the benefits, yet a few more years of cheap oil! Ain't you proud of the USA and the US Army?
No, just proud of Big Oil with the biggest profits in the history of the world; and our political leaders who lie, take legalized as well as illegal bribes, and the private contractors who make upwards of 1,000% profit margins from no-bid contracts. Now that is something to be proud of
If you think the US taxpayer is reaping the benefits, you are sadly mistaken and naive.
M I S S I O N A C C O M P L I S H E D !
Iraq oil auction dashes majors' bonanza hopes - companies sought operating fees far above what Iraq was prepared to pay,
The Iraqis are not so green as they are cabbage looking.
Deepa
American imperial aggression has been for the control of resources. From the beginning, Iraq oil was the main target in the American invasion and massacre of innocent citizens of Iraq.
Control of Iraqi oil was a motive of the US “preventive war” against Iraq. This was confirmed by the documents released under the Freedom of Information Act from a National Energy Task Force chaired by Dick Cheney in early 2001.
Cheney’s Energy Task Force authored a variety of documents relating to the oil industries of Iraq, United Arab Emirates and Saudi Arabia. The document Foreign Suitors for Iraqi Oilfield Contracts, dated March 5, 2001, includes a table listing 30 countries which have interests in Iraq’s oil industry. The document also includes the names of companies that have interests, the oil fields with which those interests are associated, as well as the status of those interests. The documents include a map of Iraq’s oil fields with markings for “super giant” oil fields of 5 billion barrels or more, other oilfields, fields “earmarked for production sharing,” oil pipelines, operational refineries, and tanker terminals.
“Context of ‘March 2001: Cheney’s Energy Task Force Eyes Iraq’s Oil Reserves.”
http://www.historycommons.org/context.jsp?item=complete_timeline_of_the_2003_invasion_of_iraq_460.
Cheney's pissed:
He conquered and occupied an entire nation for us, and we're just gonna give it back!
http://www.nbcwashington.com/news/us_world/NATLIraq-Pullout-Could-Boost-Insurgents-Cheney-.html
Uhhhh, make that "WE conquered an entire nation for HIM" (and his big oil minions). No wonder the VP who was always at some "undisclosed location" is now front and center.
OT - Cynthia McKinney Reportedly Taken Captive By Israeli Navy
From GreenPartyWatch dot org, June 30 2009
Today Israeli Occupation Forces attacked and boarded the Free Gaza Movement boat, the SPIRIT OF HUMANITY, abducting 21 human rights workers from 11 countries, including Noble laureate Mairead Maguire and former U.S. Congresswoman Cynthia McKinney. The passengers and crew are being forcibly dragged toward Israel.
“This is an outrageous violation of international law against us. Our boat was not in Israeli waters, and we were on a human rights mission to the Gaza Strip,” said Cynthia McKinney, a former U.S. Congresswoman and presidential candidate. “President Obama just told Israel to let in humanitarian and reconstruction supplies, and that’s exactly what we tried to do. We’re asking the international community to demand our release so we can resume our journey.”
Full and unedited at:
http://www.greenpartywatch.org/2009/06/30/
cynthia-mckinney-reportedly-taken-captive-by-israeli-navy/
exxon, shell, bp, total: flies around a lump of shit.......
OK...
I wrote a great(lliong) comment. It was about the powers that be... oh, I can't believe this... Why am I still waiting for it to post. I hit PREVIEW COMMENT, waited and waited. I finally aquished the screen to the bottom. I got back on CD to see if it was on. No. I click it again at the bottom. Still the little green loader thing was full, but my the preview comment thing was still there, but the screen itself is empty, white. Are they censoring me? Where is my comment?
Seems that I heard a report someone from the USA assured Saddam that the US would not react if he invaded Kuait. Now two wars later and zillions of $$ and millions of lives wasted, we have with the help of Bush 1 and Bush 2, gotten in line for some to make a huge profit.
Also curiously the Bush boy's, decendants of Hitler supporter: Prescott Bush; almost succeeded in creating an overt fascist dictatorship in the USA.
And nobody cares!!! God damn you, God damn you all! (from "the Planet of the Apes")
Big oil and the cheney/bush/mic gang were responsible for the murder of more than a million people, the sacking of a nation and the looting of our treasury.
Why should they not be banned from any dealings in Iraqi oil?
Big oil is part of the oligarchy. The oligarchy is the decider. So it's not going to ban itself from anything. You just be happy you get to choose between the two oligarchy candidates in every election. Now get back to work churning your mammon. And don't be afraid to take a long expensive trip this summer, cheapskate. Do your part for the economy.
snydly July 1st, 2009 12:00 am.. Not only should they be banned, they should be indicted, prosecuted and hung. Instead, they use crooks like Madoff as a patsy to quell the masses through the complicit MSM.
Syte, I would recommend reading this long, but unbelievably revealing and mind boggling article.....
http:/www.israelshamir.net/Contributors/
Collateral_Damage_911.pdf
snydly
Thanks. I'll check it out.
Iraq's Oil Ministry should acquire all the help they need from Iran, their Islamic brothers. They have the expertise. It would help strengthen elements in the ME that might like the US to go someplace it never does-home.
Iran. For all your oil drilling, pipeline and exploraton needs.