WASHINGTON -- A company tied to Vice President Dick Cheney has won a Pentagon contract for advice on rebuilding Iraq's oil fields after a possible war.

I certainly don't think this comes as much of a surprise. There are lots of business opportunities embedded in this war. It represents the larger oil and energy issues at stake.

Michael Renner WorldWatch Institute

The contract was disclosed in the last paragraph of a Defense Department statement on preparations for Saddam Hussein's possible destruction of Iraq's oil fields in the event of a U.S.-led invasion. The statement calls for proposals on how to handle oil well fires and for assessing other damage to oil facilities. The contract went to Kellogg Brown & Root Services, which is owned by Halliburton Co., of which Cheney was chairman until his election in 2000.

The Houston company is a respected name in petroleum industry construction and one of a few companies capable of large-scale oil field reconstruction. But its ties to Cheney arouse suspicions among those who believe that a primary motive for a U.S. war in Iraq is oil.

"I certainly don't think this comes as much of a surprise," said Michael Renner, a researcher at WorldWatch Institute, commenting on the Halliburton contract, "There are lots of business opportunities embedded in this war. It represents the larger oil and energy issues at stake."

The White House wouldn't comment on how the contract might fuel such suspicions. "I deal with the reality of situations," said spokesman Ken Lisaius. "The president has made it abundantly clear about the threat that Saddam Hussein poses to us and our friends. We stand by to help rebuild a liberated Iraq."

NO COMMENT FROM CHENEY

Cheney's office declined comment, but a Halliburton spokeswoman told the Wall Street Journal that Kellogg Brown & Root has been doing government contracting since the 1940s. The Pentagon wouldn't discuss the exact size of the contract, nor how it was rewarded, saying the information is classified.

The initial Kellogg Brown & Root contract doesn't mean it has an inside track on later contracts potentially totaling billions of dollars to rehabilitate Iraq's oil fields, explore new ones and pump the increased supply.

Even if they emerge unscathed, Iraq's oil fields will need work performed by companies like Kellogg Brown & Root. Daily production has slumped during the past two decades, worn down by wars and, since 1991, by United Nations sanctions that barred imports of equipment. Daily output capacity is about 2 million barrels, down from 3.5 million barrels before Hussein took power in 1979.

With enough investment, it's thought Iraqi production could surge to 10 million to 12 million barrels a day within a decade.

Iraq's proven oil reserves of 112 billion barrels are the world's second- largest behind only Saudi Arabia. And there might be large untapped fields in Iraq ripe for exploration.

Renner is convinced that U.S. multinational oil industry firms would strike it rich in post-war Iraq. "Regime change in Baghdad would reshuffle the cards and give U.S. (and British) companies a good shot at direct access to Iraqi oil fields for the first time in 30 years -- a windfall worth hundreds of billions of dollars," he said.

Administration supporters say past history refutes claims that a war with Iraq is about oil.

"This bumper sticker mentality about oil was wrong in the 1991 Gulf War, and it's wrong now. We gave the oil back to Kuwait back then, and this war, at root, is about the nature of Saddam Hussein's regime," said James Phillips, foreign policy analyst at the Heritage Foundation.

REBUILDING TOOL

Administration officials have said they view Iraq's petroleum wealth as a tool for rebuilding. "Iraq's natural resources belong to all the Iraqi people and -- after decades of being used to build palaces and weapons of mass destruction -- will finally be used for their benefit, not Hussein's," wrote deputy national security adviser Steve Hadley in a recent op-ed article in the Washington Post.

In saying that, the White House is following international law, said David Caron, a professor at UC Berkeley's Boalt Hall School of Law. Under the 1907 Hague Convention, the United States would be present in Iraq as an occupying power and would hold the country's resources in trust.

It could rebuild Iraq's oil infrastructure, but probably would have to recognize contracts that oil companies from France, China and Russia have signed with Hussein's regime, even though their governments oppose a war.

"I don't think the United States would get into breaching contracts, but there would be room for new contracts to be let," Caron said.

Using an open bidding process that wouldn't favor American firms "would be wise politically," he added.

EXPERIENCE IN KUWAIT

In San Francisco, anti-war activists have accused the Bechtel Corp., the engineering firm that rebuilt Kuwait's oil fields after Hussein destroyed them in the 1991 Gulf War, of waiting to profit from a new conflict. Bechtel officials discount that assertion as nonsense.

Spokesman Jonathan Marshall said that while the company is proud of the work it did rebuilding Kuwait's fields, "Bechtel has never lobbied to create a political crisis there. We're not even at war yet, so it's premature to speculate."

But Marshall added that "I'm sure the United States government will consider Bechtel if there is work to be done."

A report by the James A. Baker III Institute for Public Policy at Rice University, a think tank created by the former secretary of state to the first President George Bush, warns the current administration not to show favoritism for American firms in rebuilding Iraq's oil industry.

"There should be a level playing field for all international players to participate in future repair, development and exploration efforts," the report said. "A heavy-handed American approach will only convince them (the Iraqis) . . . and the rest of the world that the operation against Iraq was undertaken for imperialist, rather than disarmament, reasons."

©2003 San Francisco Chronicle

###