Iraq Oil Report

Here’s a thought experiment from The Wall Street Journal: Assume that Iraq’s democratic government declared it was nationalizing its oil industry, a la Venezuela or Saudi Arabia, while excluding American companies from the country. How do you think U.S. politicians would react? With angry cries of “ingratitude” and “this is what Americans died for”?

Of course they would, led no doubt by that critic for all reasons, Senator Chuck Schumer of New York. So it is passing strange that Mr. Schumer and other Senators are now assailing Iraq precisely because it is opening up to foreign oil companies, especially to U.S. majors like Exxon Mobil and Chevron.

Democratic lawmakers say the Bush administration knew more than it let on about a controversial oil deal between Dallas-based Hunt Oil and Kurdish regional officials in Iraq, a move that sparked condemnation for complicating the country’s ability to enact a nationwide oil law.

Hunt Oil, whose chief executive Ray L. Hunt is a member of the President’s Foreign Intelligence Advisory Board and a major contributor to Bush’s campaigns, signed a petroleum production-sharing contract in September with the Kurdistan Regional Government, the first since the semi-autonomous government unanimously adopted its own petroleum legislation in August, Derek Kravitz writes for The Washington Post.

Five years after the American occupation of Iraq, oil policy has finally started attracting significant attention from Iraqi policymakers. In fact, 2008 can be considered the year of big oil decisions at this stage of Iraq’s history. Currently, the ministry of oil is negotiating two types of contracts with international corporations, one for technical services and the other for development and production. The ministry needs the approval of the council of ministers for the former type whereas the latter needs to be presented in parliament once the oil law has been enacted. Since the ministry has received no approvals for either type, any talk about agreements with international corporations remains premature says Walid Khadduri for Al-Hayat.

The Production Sharing Agreements in Iraq resemble the kinds of arrangements that used to prevail in the Middle East when a handful of U.S. and British oil companies controlled the world’s oil through their cartel known as the Seven Sisters, Linda McQuaig writes for The Toronto Star.

Ironically, four of the companies returning to Iraq – ExxonMobil, BP, Shell and Total – were the original partners in a consortium called the Iraq Petroleum Company that for decades held the exclusive rights to develop oil in Iraq. They were kicked out in 1972 when Saddam nationalized the country’s oil industry.

Agence France Presse reports that Iraq said it would be guided by the principle of competition when awarding contracts to global energy companies hoping to cash in on the country’s vast oil and gas fields.

On Monday the oil ministry threw open six oilfields and two gas fields for international bidding by 41 companies, the contracts for which are expected to be signed in June next year.

Government spokesman Ali al-Dabbagh said Baghdad would award the service contracts only on the basis of competition.

“There is no intention of signing oil deals outside the law. The principle of competition will be applied. There is no preference to any company,” he said.

Power Machines, Russia’s biggest energy machinery producer, announced that it would build a 26.8-megawatt hydrostation in northern Iraq by July 2010, raising hopes for other Russian firms looking to re-enter the country, The Moscow Times reports.

Financial terms for the deal would not be disclosed, Power Machines said in a statement, although an analyst estimated that it was worth $16 million to $18 million. Originally signed in 2001, the contract was suspended shortly after U.S.-led troops toppled Saddam Hussein in 2003.

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