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Four Western oil companies back in Iraq!!!!


Kanada Kev
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Is this really a surprise?!?! Fuck ... what was the reason the invasion was started again :(

http://www.nytimes.com/2008/06/19/world/middleeast/19iraq.html?_r=2&hp&oref=slogin&oref=slogin

Deals With Iraq Are Set to Bring Oil Giants Back

Moises Saman for The New York Times

19iraq_600.jpg

Oil fields in the Iraqi province of Basra. Iraq produces about 2.5 million barrels of oil per day.

By ANDREW E. KRAMER

Published: June 19, 2008

BAGHDAD — Four Western oil companies are in the final stages of negotiations this month on contracts that will return them to Iraq, 36 years after losing their oil concession to nationalization as Saddam Hussein rose to power.

Exxon Mobil, Shell, Total and BP — the original partners in the Iraq Petroleum Company — along with Chevron and a number of smaller oil companies, are in talks with Iraq’s Oil Ministry for no-bid contracts to service Iraq’s largest fields, according to ministry officials, oil company officials and an American diplomat.

The deals, expected to be announced on June 30, will lay the foundation for the first commercial work for the major companies in Iraq since the American invasion, and open a new and potentially lucrative country for their operations.

The no-bid contracts are unusual for the industry, and the offers prevailed over others by more than 40 companies, including companies in Russia, China and India. The contracts, which would run for one to two years and are relatively small by industry standards, would nonetheless give the companies an advantage in bidding on future contracts in a country that many experts consider to be the best hope for a large-scale increase in oil production.

There was suspicion among many in the Arab world and among parts of the American public that the United States had gone to war in Iraq precisely to secure the oil wealth these contracts seek to extract. The Bush administration has said that the war was necessary to combat terrorism. It is not clear what role the United States played in awarding the contracts; there are still American advisers to Iraq’s Oil Ministry.

Sensitive to the appearance that they were profiting from the war and already under pressure because of record high oil prices, senior officials of two of the companies, speaking only on the condition that they not be identified, said they were helping Iraq rebuild its decrepit oil industry.

For an industry being frozen out of new ventures in the world’s dominant oil-producing countries, from Russia to Venezuela, Iraq offers a rare and prized opportunity.

While enriched by $140 per barrel oil, the oil majors are also struggling to replace their reserves as ever more of the world’s oil patch becomes off limits. Governments in countries like Bolivia and Venezuela are nationalizing their oil industries or seeking a larger share of the record profits for their national budgets. Russia and Kazakhstan have forced the major companies to renegotiate contracts.

The Iraqi government’s stated goal in inviting back the major companies is to increase oil production by half a million barrels per day by attracting modern technology and expertise to oil fields now desperately short of both. The revenue would be used for reconstruction, although the Iraqi government has had trouble spending the oil revenues it now has, in part because of bureaucratic inefficiency.

For the American government, increasing output in Iraq, as elsewhere, serves the foreign policy goal of increasing oil production globally to alleviate the exceptionally tight supply that is a cause of soaring prices.

The Iraqi Oil Ministry, through a spokesman, said the no-bid contracts were a stop-gap measure to bring modern skills into the fields while the oil law was pending in Parliament.

It said the companies had been chosen because they had been advising the ministry without charge for two years before being awarded the contracts, and because these companies had the needed technology.

A Shell spokeswoman hinted at the kind of work the companies might be engaged in. “We can confirm that we have submitted a conceptual proposal to the Iraqi authorities to minimize current and future gas flaring in the south through gas gathering and utilization,†said the spokeswoman, Marnie Funk. “The contents of the proposal are confidential.â€

While small, the deals hold great promise for the companies.

“The bigger prize everybody is waiting for is development of the giant new fields,†Leila Benali, an authority on Middle East oil at Cambridge Energy Research Associates, said in a telephone interview from the firm’s Paris office. The current contracts, she said, are a “foothold†in Iraq for companies striving for these longer-term deals.

Any Western oil official who comes to Iraq would require heavy security, exposing the companies to all the same logistical nightmares that have hampered previous attempts, often undertaken at huge cost, to rebuild Iraq’s oil infrastructure.

And work in the deserts and swamps that contain much of Iraq’s oil reserves would be virtually impossible unless carried out solely by Iraqi subcontractors, who would likely be threatened by insurgents for cooperating with Western companies.

Yet at today’s oil prices, there is no shortage of companies coveting a contract in Iraq. It is not only one of the few countries where oil reserves are up for grabs, but also one of the few that is viewed within the industry as having considerable potential to rapidly increase production.

David Fyfe, a Middle East analyst at the International Energy Agency, a Paris-based group that monitors oil production for the developed countries, said he believed that Iraq’s output could increase to about 3 million barrels a day from its current 2.5 million, though it would probably take longer than the six months the Oil Ministry estimated.

Mr. Fyfe’s organization estimated that repair work on existing fields could bring Iraq’s output up to roughly four million barrels per day within several years. After new fields are tapped, Iraq is expected to reach a plateau of about six million barrels per day, Mr. Fyfe said, which could suppress current world oil prices.

The contracts, the two oil company officials said, are a continuation of work the companies had been conducting here to assist the Oil Ministry under two-year-old memorandums of understanding. The companies provided free advice and training to the Iraqis. This relationship with the ministry, said company officials and an American diplomat, was a reason the contracts were not opened to competitive bidding.

A total of 46 companies, including the leading oil companies of China, India and Russia, had memorandums of understanding with the Oil Ministry, yet were not awarded contracts.

The no-bid deals are structured as service contracts. The companies will be paid for their work, rather than offered a license to the oil deposits. As such, they do not require the passage of an oil law setting out terms for competitive bidding. The legislation has been stalled by disputes among Shiite, Sunni and Kurdish parties over revenue sharing and other conditions.

The first oil contracts for the majors in Iraq are exceptional for the oil industry.

They include a provision that could allow the companies to reap large profits at today’s prices: the ministry and companies are negotiating payment in oil rather than cash.

“These are not actually service contracts,†Ms. Benali said. “They were designed to circumvent the legislative stalemate†and bring Western companies with experience managing large projects into Iraq before the passage of the oil law.

A clause in the draft contracts would allow the companies to match bids from competing companies to retain the work once it is opened to bidding, according to the Iraq country manager for a major oil company who did not consent to be cited publicly discussing the terms.

Assem Jihad, the Oil Ministry spokesman, said the ministry chose companies it was comfortable working with under the charitable memorandum of understanding agreements, and for their technical prowess. “Because of that, they got the priority,†he said.

In all cases but one, the same company that had provided free advice to the ministry for work on a specific field was offered the technical support contract for that field, one of the companies’ officials said.

The exception is the West Qurna field in southern Iraq, outside Basra. There, the Russian company Lukoil, which claims a Hussein-era contract for the field, had been providing free training to Iraqi engineers, but a consortium of Chevron and Total, a French company, was offered the contract. A spokesman for Lukoil declined to comment.

Charles Ries, the chief economic official in the American Embassy in Baghdad, described the no-bid contracts as a bridging mechanism to bring modern technology into the fields before the oil law was passed, and as an extension of the earlier work without charge.

To be sure, these are not the first foreign oil contracts in Iraq, and all have proved contentious.

The Kurdistan regional government, which in many respects functions as an independent entity in northern Iraq, has concluded a number of deals. Hunt Oil Company of Dallas, for example, signed a production-sharing agreement with the regional government last fall, though its legality is questioned by the central Iraqi government. The technical support agreements, however, are the first commercial work by the major oil companies in Iraq.

The impact, experts say, could be remarkable increases in Iraqi oil output.

While the current contracts are unrelated to the companies’ previous work in Iraq, in a twist of corporate history for some of the world’s largest companies, all four oil majors that had lost their concessions in Iraq are now back.

But a spokesman for Exxon said the company’s approach to Iraq was no different from its work elsewhere.

“Consistent with our longstanding, global business strategy, ExxonMobil would pursue business opportunities as they arise in Iraq, just as we would in other countries in which we are permitted to operate,†the spokesman, Len D’Eramo, said in an e-mailed statement.

But the company is clearly aware of the history. In an interview with Newsweek last fall, the former chief executive of Exxon, Lee Raymond, praised Iraq’s potential as an oil-producing country and added that Exxon was in a position to know. “There is an enormous amount of oil in Iraq,†Mr. Raymond said. “We were part of the consortium, the four companies that were there when Saddam Hussein threw us out, and we basically had the whole country.â€

James Glanz and Jad Mouawad contributed reporting from New York.

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Not that I read it all the way through but the 'only' strange thing I saw was the fact that they were no bid contracts. Its not like the oil is going to go to the USA. Like all other oil it will be sold on the 'world market'. * I would agree with the idea that high gas prices are in many ways a good thing.

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To add to the horror, we can throw the Afghan pipeline into the mix, which Canadian troops will have the all-important task of protecting it appears.

Pipeline opens new front in Afghan war

Canadian role in Kandahar may heat up as allies agree on U.S.-backed energy route through land-mine zones and Taliban hot spots

SHAWN MCCARTHY

From Thursday's Globe and Mail

June 19, 2008 at 2:30 AM EDT

OTTAWA — Afghanistan and three of its neighbouring countries have agreed to build a $7.6-billion (U.S.) pipeline that would deliver natural gas from Turkmenistan to energy-starved Pakistan and India – a project running right through the volatile Kandahar province – raising questions about what role Canadian Forces may play in defending the project.

To prepare for proposed construction in 2010, the Afghan government has reportedly given assurances it will clear the route of land mines, and make the path free of Taliban influence.

In a report to be released Thursday, energy economist John Foster says the pipeline is part of a wider struggle by the United States to counter the influence of Russia and Iran over energy trade in the region.

The so-called Turkmenistan-Afghanistan-Pakistan-India pipeline has strong support from Washington because the U.S. government is eager to block a competing pipeline that would bring gas to Pakistan and India from Iran.

The TAPI pipeline would also diminish Russia's dominance of Central Asian energy exports.

Mr. Foster said the Canadian government has long ignored the broader geopolitical aspects of the Afghanistan deployment, even as NATO forces, including Canadian troops, could be called upon to defend the critical energy infrastructure.

“Government efforts to convince Canadians to stay in Afghanistan have been enormous,†he says in a report prepared for the Canadian Centre for Policy Alternatives, a left-of-centre think tank in Ottawa.

“But the impact of the proposed multibillion-dollar pipeline in areas of Afghanistan under Canadian purview has never been seriously debated.â€

In an interview, Mr. Foster – a former economist with Petro-Canada, the World Bank and the Inter-American Development Bank – said he believes the TAPI project could provide major benefits for Afghanistan and the region generally. If the project proceeds – and serious obstacles remain – Afghanistan's national government could reap $160-million (U.S.) a year in transit fees, an amount equivalent to half the government's current revenue.

But he said the security issues remain daunting and the Canadian military could – wittingly or not – become embroiled in a “new great game†over energy security that is playing out in the region.

Acting Foreign Affairs Minister David Emerson – who chairs the cabinet committee on Afghanistan – would not comment on the pipeline yesterday. When asked about the project earlier this spring, he said only that Canada wants to see Afghanistan develop a “legitimate and legal economy that can sustain a credible, viable state.â€

Backed by the opposition Liberals, the Conservative government has committed to keeping the Canadian Forces in Afghanistan until 2011, although there is growing skepticism that the engagement will end at that point.

New Democratic Party MP Paul Dewar said the government needs to be more forthcoming about the four-nation project and whether Canadian forces would end up guarding the pipeline.

Though experts remain skeptical that the project will get off the ground, the four countries appear determined to prove them wrong.

With the backing of Manila-based Asian Development Bank, ministers from the four countries met in late April and agreed to start construction of the pipeline by 2010, and begin supplying gas by 2015, although critical financial issues must still be worked out.

At a donor's conference attended by a Canadian delegation last November, countries committed to “assist Afghanistan to become an energy bridge in the region†and to accelerate work on the TAPI pipeline “to develop a technically and commercially viable project.â€

There was no public discussion of who would provide the security for the project.

The pipeline proposal goes back to the 1990s, when the Taliban government held talks with California-based Unocal Corp. – and its U.S. government backer – while considering a competing bid by Argentina's Bridas Corp. Those U.S.-Taliban talks broke down in August, 2001. India, which desperately needs natural gas imports to fuel its growth, later joined the revived project.

Last week, U.S. Assistant Secretary of State Richard Boucher said the U.S. government has a “fundamental strategic interest†in Afghanistan that goes well beyond ensuring it is not used as a launching pad for terrorism, which was the original justification for the UN-sanctioned NATO mission of which Canada is a part.

That objective remains paramount, Mr. Boucher said, but he added that there is a “historic opportunity … of having an open Afghanistan that can act as a conduit for energy, ideas, people, trade, goods from Central Asia and other places down to the Arabian Sea.â€

Stephen Blank, a professor at the U.S. Army War College, in Carlisle Barracks, Pa., said the U.S. government is particularly eager to provide an alternative to the proposed $7.5-billion (U.S.) Iran-Pakistan-India pipeline, which those three countries have agreed to pursue.

“From the U.S. viewpoint, the idea of blocking Iran is of paramount significance,†he said.

As well, the United States is pushing the TAPI pipeline as one of several natural gas export options from Central Asia that would bypass Russia, which until now has maintained a stranglehold on gas exports from the region.

But Dr. Blank – who has written extensively on energy-related geopolitics in the region – said he doesn't believe the TAPI pipeline will be built any time soon due to security concerns.

Still, the project is seen as a key part of Afghanistan's strategic development plan, which Canada and its NATO partners have endorsed as critical to establishing its political stability.

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Just to sort of play devil's advocate here ..

Calling on multinational energy companies to revive dilapidated oil fields isn't really unusual, and many of the existing agreements were thrown out in the post-Saddam era. One could look at that as deferring to US pressure to not engage in business with France and Russia, or one could equally hazard a guess that post-Saddam Iraqis aren't terribly anxious to continue to do business with Saddam's playmates under terms negotiated by Saddam, particularly when that sector is being re-thought and highly politicized domestically. If it is true that ~90% of Iraq's budget comes from oil revenues, as some estimates have it, I'm not all that surprised that they are anxious to get it humming along again as quickly as possible.

Interesting to note that of the five energy companies mentioned, only 2 of the 5 are US companies. The companies are also limited only to selling expertise and equipment and are expressly blocked from management or providing capital. They are basically outsourced consultants, not producers or owners of the black stuff.

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For the American government, increasing output in Iraq, as elsewhere, serves the foreign policy goal of increasing oil production globally to alleviate the exceptionally tight supply that is a cause of soaring prices.

And holy crap, a US paper acknowledged "tight supply" as the impetus behind soaring prices and showed enough restraint to not, in the next breath (figuratively), cast dispersion on speculators, or evil wizards, or bad alignment of the stars, or whatever else is usually trotted out to apologize for bringing up the uncomfortable notion that demand may be pulling out ahead of affordable supply.

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Mr. d jango Pretty good stuff with respect to your opinion on the subject. I was thinking about the issue last night and was wondering who is ultimately in control of the issue. I thought it was the 'multi-nationals' but even better if remains in control of Iraq itself. In other projects in the past I have heard in cases where initially it was owned by the 'm-n' but over time the state took control of the industries.

* This still begs the question of whether or not GWB started the war just to 'stabilize' supply.

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