Western oil firms remain as US exits Iraq 

The end of the US military occupation does not mean Iraqis 
have full control of their oil. 

By Dahr Jamail
al jazeera.net
January 07 2012

http://www.aljazeera.com/indepth/features/2011/12/2011122813134071641.html

Baghdad, Iraq - While the US military has formally ended its
occupation of Iraq, some of the largest western oil
companies, ExxonMobil, BP and Shell, remain.

On November 27, 38 months after Royal Dutch Shell announced
its pursuit of a massive gas deal in southern Iraq, the oil
giant had its contract signed for a $17bn flared gas deal.

Three days later, the US-based energy firm Emerson submitted
a bid for a contract to operate at Iraq's giant Zubair oil
field, which reportedly holds some eight million barrels of
oil.

Earlier this year, Emerson was awarded a contract to provide
crude oil metering systems and other technology for a new oil
terminal in Basra, currently under construction in the
Persian Gulf, and the company is installing control systems
in the power stations in Hilla and Kerbala.

Iraq's supergiant Rumaila oil field is already being
developed by BP, and the other supergiant reserve, Majnoon
oil field, is being developed by Royal Dutch Shell. Both
fields are in southern Iraq.

According to the US Energy Information Administration (EIA),
Iraq's oil reserves of 112 billion barrels ranks second in
the world, only behind Saudi Arabia. The EIA also estimates
that up to 90 per cent of the country remains unexplored, due
to decades of US-led wars and economic sanctions.

"Prior to the 2003 invasion and occupation of Iraq, US and
other western oil companies were all but completely shut out
of Iraq's oil market," oil industry analyst Antonia Juhasz
told Al Jazeera. "But thanks to the invasion and occupation,
the companies are now back inside Iraq and producing oil
there for the first time since being forced out of the
country in 1973."

"The last thing the US cares about in the Middle East is
democracy. It is about oil, full stop."

- Dr Abdulhay Yahya Zalloum

Juhasz, author of the books The Tyranny of Oil and The Bush
Agenda, said that while US and other western oil companies
have not yet received all they had hoped the US-led invasion
of Iraq would bring them, "They've certainly done quite well
for themselves, landing production contracts for some of the
world's largest remaining oil fields under some of the
world's most lucrative terms."

Dr Abdulhay Yahya Zalloum, an international oil consultant
and economist who has spent nearly 50 years in the oil
business in the US, Europe, Asia and the Middle East, agrees
that western oil companies have "obtained concessions in
Iraq's major [oil] fields", despite "there being a lack of
transparency and clarity of vision regarding the legal
issues".

Dr Zalloum added that he believes western oil companies have
successfully acquired the lions' share of Iraq's oil, "but
they gave a little piece of the cake for China and some of
the other countries and companies to keep them silent".

In a speech at Fort Bragg in the wake of the US military
withdrawal, US President Barack Obama said the US was leaving
behind "a sovereign, stable and self-reliant Iraq, with a
representative government that was elected by its people".

Of this prospect, Dr Zalloum was blunt.

"The last thing the US cares about in the Middle East is
democracy. It is about oil, full stop."

A strong partnership?

A White House press release dated November 30 titled, "Joint
Statement by the United States of America and the Republic of
Iraq Higher Coordinating Committee", said this about "energy
co-operation" between the two countries:

"The United States is committed to supporting the Republic of
Iraq in its efforts to develop the energy sector. Together,
we are exploring ways to help boost Iraq's oil production,
including through better protection for critical
infrastructure."

Follow Al Jazeera's continuing coverage of Iraq

Iraq is one of the largest oil exporters to the US, and has
plans to raise its overall crude oil exports to 3.3m barrels
per day (bpd) next year, compared with their target of 3m bpd
this year, according to Assim Jihad, spokesman for Iraq's
ministry of oil.

Jihad told Al Jazeera that Iraq has a goal of raising its oil
production capacity to 12m bpd by 2017, which would place it
in the top echelon of global producers.

According to Jihad, Iraq's 2013 production goal is 4.5m bpd,
and in 2014 it is 5m bpd. The 2017 goal is ambitious, given
that Iraq did not meet its 2011 goal, and many officials say
8m bpd capacity is more realistic for 2017.

Unexplored regions of Iraq could yield an additional 100bn
barrels, and Iraq's production costs are among the lowest in
the world.

To date, only about 2,000 wells have been drilled in Iraq,
compared with roughly one million wells in Texas alone.

Globally, current oil usage is approximately 88m bpd. By
2030, global petroleum demand will grow by 27m bpd, and many
energy experts see Iraq as being a key player in meeting this
demand.

It is widely understood that Iraq will require at least
$200bn in physical and human investments to bring its
production capacity up to 12m bpd, from its current
production levels.

Juhasz explained that ExxonMobil, BP and Shell were among the
oil companies that "played the most aggressive roles in
lobbying their governments to ensure that the invasion would
result in an Iraq open to foreign oil companies".

Iraq's oil reserves may be second only to Saudi Arabia's
[EPA]

"They succeeded," she added. "They are all back in. BP and
CNPC [China National Petroleum Corporation] finalised the
first new oil contract issued by Baghdad for the largest oil
field in the country, the 17 billion barrel super giant
Rumaila field. ExxonMobil, with junior partner Royal Dutch
Shell, won a bidding war against Russia's Lukoil (and junior
partner ConocoPhillips) for the 8.7 billion barrel West Qurna
Phase 1 project. Italy's Eni SpA, with California's
Occidental Petroleum and the Korea Gas Corp, was awarded
Iraq's Zubair oil field with estimated reserves of 4.4
billion barrels. Shell was the lead partner with Malaysia's
Petroliam Nasional Bhd., or Petronas, winning a contract for
the super-giant Majnoon field, one of the largest in the
world, with estimated reserves of up to 25 billion."

Zalloum says there is a two-fold interest for the western oil
companies.

"There is development of the existing fields, but also for
the explored but not-yet-produced fields," he said. "For the
old fields, there are two types of development. One is to
renovate the infrastructure, since for most of the past 25
years it has depreciated due to the sanctions and turmoil.
Also, some of these fields have different stratum, so once
they use innovative techniques like horizontal drilling,
there is a huge potential in the fields they have explored."

But there are complicating factors. As a spasm of violence
wracked Baghdad in the wake of the US military withdrawal and
political rifts widen, Iraq's instability is evident.

"Iraq has lots of cheap-to-get oil, but it also has a
multitude of problems - political, ethnic, tribal, religious
etc - that have prevented them from exploiting it as well or
as quickly as the Saudis," says Tom Whipple, an energy
scholar who was a CIA analyst for 30 years. "Someday it may
turn out that Iraq has more oil underground than Saudi
Arabia. The big question is how stable it will be after the
US leaves? So far it is not looking all that good."

Jihad, Iraq's ministry of oil spokesman, however, said
attacks against Iraq's oil pipelines have minimal effect on
production capabilities, and claimed "sabotage will not
affect our oil production and exports because we can fix
these damages within days, or even hours".

Whipple, a fellow at the Post-Carbon Institute, says Baghdad
had driven a hard bargain with western oil companies.

"The only reason they are participating is because everybody
else is and they hope to get a foot in the door in case some
new government in Iraq changes its policies to let other
outsiders make more money. Remember it is not all the
traditional western oil companies that are in there; the
Chinese, Russians and Singapore all want a piece of the
action."

Wrong idea?

Spokesman Jihad told Al Jazeera that the reason many Iraqis
think western oil companies are operating in Iraq is simply
to steal Iraq's oil.

"These ideas were obtained during the regime of deposed
dictator Saddam Hussein, and these are the wrong ideas," he
said. "The future will help Iraqis understand these companies
have come to work here to help Iraq sell its oil to help the
people, and they work to serve the country."

Jihad admitted that his media office works "to help Iraqis
understand the nature of the work of these companies and
their investing in Iraq".

Despite the efforts of Jihad's office to prove otherwise,
Iraqis Al Jazeera spoke with disagree.

"If Iraq had no oil, would America have sacrificed thousands
of its soldiers and hundreds of billions of dollars to come
here?"

- Basim al-Khalili

"Only a naïve child could believe the Americans came here for
something besides our oil," Ahmed Ali, an unemployed
engineer, told Al Jazeera. "Nor can we believe their being
here has anything to do with helping the Iraqi people."

Basim al-Khalili, a restaurant owner in Baghdad's Karada
district, agrees.

"If Iraq had no oil, would America have sacrificed thousands
of its soldiers and hundreds of billions of dollars to come
here?"

Oil analyst Juhasz also agrees.

"The US and other western oil companies and their governments
had been lobbying for passage of a new national law in Iraq,
the Iraq Oil Law, which would move Iraq from a nationalised
to a largely privatised oil market using Production Sharing
Agreements (PSAs), a type of contract model used in just
approximately 12 per cent of the world's oil market."

She explained that this agreement has been summarily rejected
by most countries, including all of Iraq's neighbours,
"because it provides far more benefits to the foreign
corporation than to the domestic government".

But it has not been an easy road for the western oil
companies in Iraq.

"Major western companies, such as Chevron and ConocoPhillips,
that had hoped to sign contracts were unable to do so. A
third round [of contracts] took place in December 2010 and
saw no major western oil companies (except Shell) win
contracts. I believe that there was an Iraqi backlash against
the awarding of contracts to the large western major oil
companies. Thus, in December 2010, fields went to Russian oil
companies Lukoil and Gazprom, Norway's Statoil, and the
Angolan company Sonangol, among others."

Unlike under Iraq's Oil Law, these contracts do not need to
go through parliament, according to the central government.
This means the contracts are being signed without public
discourse.

Dahr Jamail reports from Baghdad on the recent bombings which
left scores dead across the country

"The public is against privatisation, which is one reason why
the law has not passed," added Juhasz. "The contracts are
enacting a form of privatisation without public discourse and
essentially at the butt of a gun - these contracts have all
been awarded during a foreign military occupation with the
largest contracts going to companies from the foreign
occupiers' countries. It seems that democracy and equity are
the two largest losers in this oil battle."

Iraq's oil future

Under the current circumstances, the possibility of a
withdrawal of western oil companies from Iraq appears remote,
and the Obama administration continues to pressure Baghdad to
pass the Iraq Oil Law.

Nevertheless, resistance to the western presence continues.

"The bottom line is that it seems clear that the majority of
Iraqis want their oil and its operations to remain in Iraqi
hands," said Juhasz. "Thus far, it has required a massive
foreign military invasion and occupation to grant the foreign
oil companies the access they have thus far garnered."

While Iraq's security remains as volatile as ever, as does
the political landscape - which can change dramatically at
any moment - there is one thing we can always count on as
being at the heart of these conflicts, and that is Iraq's
oil.

Follow Dahr Jamail on Twitter: @DahrJamail

Source:

Al Jazeera

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