IRAQ: Forbidden fields: Oil groups circle the prize of Iraq's vast reserves

[Joanne98]

Royal Dutch Shell has been quietly working with Iraq's oil ministry over the past two years, advising it on how to increase the production of two oilfields. Under an agreement struck after the 2003 invasion, no one from the company, Europe's largest oil group, has set foot in the troubled country; instead, monthly face-to-face meetings with the oil ministry have been held in Amman, the Jordanian capital, and weekly contact has been maintained by video-link.

The Shell-financed project - and the attention showered on Baghdad - appears to be paying off: Shell is now negotiating a technical support agreement in which it will be compensated for helping upgrade production of producing fields. The oil company will again set up a team outside Iraq, helping, among other things, to bring new equipment into the country and training Iraqis in its use.

Shell is one of several international oil companies - including BP and the US groups ExxonMobil and Chevron - that have been tapping into Iraq's oil industry by remote control.

But now, five years after the invasion, the oil groups are hoping to take their involvement in the country to a new level. Baghdad, desperate to increase oil production yet starved of investment, is starting to dangle what the companies have been after all along: a chance to develop and later explore what may be the world's most promising untapped oil reserves. Indeed, as the companies gear up for technical support agreements, they are also registering to pre-qualify for the first bidding round of oil development contracts that are to be offered by Baghdad.

"The were done to work with the Iraqis, get a feeling for fields and build relationships and knowledge," says one oil executive, speaking of the assistance projects provided so far.

With parts of the global oil industry threatened with nationalisation and much of the Middle East still closed to foreign ownership of reserves, access to Iraq, with the world's third-largest oil reserves, has long been viewed as a huge prize. Although no decision has yet been made in Baghdad over the nature of the development or the eventual exploration contracts that will be on offer, Iraq could prove one of the rare countries in the region where companies will be allowed to claim reserves as their own. "This is the big frontier," says Raad Alkadiri, a senior director at Washington-based PFC Energy.

According to the oil ministry, only 27 out of 80 discovered fields are producing in Iraq, the result of decades of under-investment. A report by Wood Mackenzie, the consultancy, meanwhile says the scale of Iraq's remaining oil resources surpasses allother countries in the Middle East, including Saudi Arabia, and its high-quality reservoirs ensure that production costs would be very low.

But Iraq is also a dangerous frontier. Companies invited to invest in its oil industry - and satisfy Baghdad's plans at least to double oil production from the current 2.5m barrels a day - will be walking into a political, security and legislative minefield. Their involvement threatens to exacerbate the sectarian tensions that have torn the country apart since the US-led invasion.

International oil companies acknowledge that security, although better over the past year, will still need to improve significantly before workers are dispatched to Iraq. The weakness of the central government and its patchy control over the southern part of the country, home to 80 per cent of proved oil reserves, will also be taken into account. Perhaps most important, however, is that they could be entering a country with deep political fissures and lingering anger at foreign intervention, without clear legislation allowing for foreign participation.
http://www.corpwatch.org/article.php?id=14983

AND........

Shut out elsewhere, executives await the end of a long exile

Just months before US tanks rolled into Baghdad and Saddam Hussein was toppled, US government officials met allies from Iraq's opposition and decided it was in the country's interest for a new government to open its oil industry to foreign participation as quickly as possible, writes Dino Mahtani

The so called "Oil and Energy" working group of the US state department, which met four times in 2002 and 2003 and included influential Iraqi exiles, had put forward the idea as a crucial plank in Iraq's postwar reconstruction plans. Increased foreign participation in Iraq's oil industry, members argued, would help revitalise its most important economic lifeline - ravaged by years of neglect and underinvestment under Saddam's regime.

[cornermouse]

1. The vultures gather?