Monthly Archive for July, 2008

Chomsky speaks on Iraqi oil

Published
by
Dan Graeber
on July 8, 2008
in Uncategorized
. 14 Comments

The deal just taking shape between Iraq’s Oil Ministry and four Western oil companies raises critical questions about the nature of the US invasion and occupation of Iraq — questions that should certainly be addressed by presidential candidates and seriously discussed in the United States, and of course in occupied Iraq, where it appears that the population has little if any role in determining the future of their country, writes Noam Chomsky.

The Jerusalem-based intelligence-reporting agency, DEBKAfile said oil prices suddenly slumped Tuesday, July 8 under the impact of the secret American-Iranian talks embarked on last month to solve burning issues by diplomatic engagement.

These talks between the US and Iranian delegations, representing President George W. Bush and Iranian supreme ruler Ayatollah Ali Khamenei, have yielded ad hoc understandings on controversial issues. One is an agreement not to allow the price of oil to rocket past $150 the barrel.

The former Iraqi oil minister Ibrahim Bahr Al-Aloom declared that the infrastructure of the Iraqi oil sector is the worst ever among the oil producing countries and is not commensurate with the potential of Iraq’s oil.

He added: “we have not been able so far to begin the process of reconstruction in the required form, what makes us very cautious and concerned about the prospects for future development of the foundations would not allow the process capable of maintaining and developing the sector.” He called for a “sound basis of policies that oil be able to develop the infrastructure sector, to ensure the utilization of its revenue in the reconstruction of the country,” Iraq Directory reported.

Reuters reports that the Iraqi army has formed a new battalion that aims to cut the time taken to repair damaged oil pipelines by half.

Iraq’s hundreds of miles of oil pipelines have often come under attack by insurgents seeking to disrupt the flow of Iraq’s main export, and also by criminals siphoning off oil for sale on the black market.

The Engineer Infrastructure Battalion comprises engineers who will go to damaged pipelines, which carry oil to refineries for domestic use, to neighboring Turkey and also to the port city of Basra for export.

Even though Iraqis, enjoying a degree of civil safety these days after years of terror, still endure long gas lines in a country brimming with oil, hope is on the horizon. The government is opening six major oil fields and two natural gas fields to development by foreign firms. There’s talk of an achievable 60 percent increase from current production levels. That would mean more oil for the world and more revenue for the government, already set to take in $70 billion this year.

Americans can cheer that. A richer Iraq can be expected to pay more of its own way as it rebuilds. More oil on the world market — maybe even the prospect of it — helps to lower prices, The News & Observer of North Carolina writes.

The Gulf Times says Crescent Petroleum, the United Arab Emirates-based oil and gas company, along with its affiliate Dana Gas, will start producing gas from northern Iraq’s Kurdistan fields in early August, a company executive has said.

“We will start producing 75mn cu ft of gas a day within weeks and will increase to 150mn cubic feet gradually, reaching 300mn cu ft by early 2009,” Crescent’s executive director Majid Jafar said.

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Iraqi oil … on both sides of the pond

Published
by
Dan Graeber
on July 6, 2008
in Uncategorized
. 4 Comments

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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Iraq oil deals raise questions

Published
by
Dan Graeber
on July 3, 2008
in Uncategorized
. 3 Comments

Bush administration officials knew that a Texas oil company with close ties to President Bush was planning to sign an oil deal with the regional Kurdistan government that ran counter to American policy and undercut Iraq’s central government, a Congressional committee has

The conclusions were based on e-mail messages and other documents that the committee released Wednesday, James Glanz and Richard A. Oppel Jr. write for The New York Times.

Steven Mufson with the Washington Post writes that last fall the State Department said that it had tried to dissuade Hunt Oil from signing a contract with Kurdish regional authorities but that the company had proceeded “regardless of our advice.” Although Hunt Oil’s chief executive has been a major fundraiser for President Bush, the president said he knew nothing about the deal.

Yesterday, however, Henry A. Waxman (D-Calif.), chairman of the House Committee on Oversight and Government Reform, released documents and e-mails showing that for nearly four months, State and Commerce department officials knew about Hunt Oil’s negotiations with the KRG and had told company officials that there were no objections.

In Iraq this week, the giant oil fields were opened to foreign bidders. U.S. conglomerates such as Exxon Mobil are about to sign no-bid contracts to move in. Big Oil, already brimming with profits, will have a fine Fourth of July.

Azzaman notes that the central government and the Kurdish authorities have signed a secret deal under which the Kurds are to extend their political autonomy over their oil riches, a senior member of parliament said.

Jaber Khaleefa of the parliament’s Oil and Gas Committee said the secret deal has allowed both sides to proceed ahead with contracts with foreign firms despite the lack of constitutional backing.

Despite having the world’s third-largest proven oil reserves, Iraq’s production of 2.5 million barrels a day is only the 12th biggest. And although production has recently recovered to the levels seen before the 2003 US-led invasion, it is still about 1 million barrels a day below its peak in the late 1970s, the BBC’s Richard Thompson writes.

Total, one of the largest petroleum company in Europe, is “on the verge” of signing an oil-services contract with Iraq as companies from the U.S. and Europe seek to access supplies and increase production there, Anthony DiPaola writes for Bloomberg News

The French company will sign the contract as a partner of Chevron, the Total chief executive, Christophe de Margerie said Tuesday during a news conference at the World Petroleum Congress in Madrid.

Iraqi Oil Minister Hussain al-Shahristani has told lawmakers that short-term technical support contracts with oil majors worth around $3 billion may not get signed, two parliamentarians said.

The lawmakers, the two top officials on parliament’s oil and gas committee, told Reuters late on Wednesday that Shahristani was unhappy with delays in getting the contracts agreed. One sticking point was payment terms, Ahmed Rasheed reported for Reuters.

The new Baghdad deals will trigger more wrangling over the real motivation for the Iraq invasion. There was a time when it was mainly just conspiracy theorists and other assorted weedy types who claimed the aggression was chiefly about oil. But along came Alan Greenspan, the former chairman of the U.S. Federal Reserve Board, who wrote last year in his book The Age of Turbulence, “I am saddened that it is politically inconvenient to acknowledge what everyone knows: The Iraq war is largely about oil.” This week’s entry of Big Oil in Iraq will only buttress this view, says the Globe and Mail’s Lawrence Martin.

The Iraqi parliament’s oil and gas committee must have the right to scrutinise any long-term oil contracts signed with foreign firms or it will try to block the deals, the committee’s head said on Tuesday.

The comments by Ali Hussain Balou came a day after the Oil Ministry opened Iraq’s giant oilfields to bids for long-term contracts by foreigners for the first time in decades, Ahmed Rasheed reported for Reuters

Balou also demanded an explanation from Oil Minister Hussain al-Shahristani on plans to offer a series of short-term technical support contracts worth $500 million each to a handful of Western oil majors without competitive bidding.

“The parliamentary oil and gas committee … should have access to every detail on all the contracts, otherwise we will block them in parliament,” Balou, a Kurd, told Reuters.

Perhaps Sen. Schumer would approve if the Saudis were to agree to pump the Iraq oil?A few weeks ago New York Sen. Schumer and aspiring global Petroleum Czar was threatening to block arms sales to Saudi Arabia if it didn’t produce more oil. Now, he’s outraged that the Iraqi government may give modest no-bid service contracts to Western oil companies as a first step toward more fully exploiting the country’s vast oil reserves, the editors of the National Review said.

Mohammed Abbas for ArabianBusiness.com writes that Iraq’s finance ministry wants to raise its 2008 budget by 44 percent to a record $70 billion, cashing in on record oil prices to rebuild shattered infrastructure, the government’s spokesman said on Wednesday.

The ministry’s submission of a supplementary budget of $21 billion - on top of February’s 2008 budget of $48 billion - comes as prices for Iraq’s main export oil hits record highs.

“This enhanced budget that results from the stability in Iraq’s oil exports… will have tangible positive effects on the provision of basic services in the country,” government spokesman Ali Al-Dabbagh said in a statement.

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Iraqi oil: Deal or no deal?

Published
by
Dan Graeber
on July 1, 2008
in Uncategorized
. 2 Comments

“The United States was not involved in any decisions to award contracts, to make determinations of what kinds of contracts would be offered, to provide advice over what kinds of contracts would be offered. These are technical experts that we have working in the Iraqi Oil Ministry, who are similar to the technical experts we have working in many ministries throughout the government. Saying that they are somehow responsible for this matter, would be equivalent to saying that the person who does your taxes is responsible for how much income you earned. It’s simply not true,” said U.S. State Department deputy spokesperson Tom Casey.

Frustrated Iraqis trying to tank up their cars faced miles-long gas lines on Tuesday — a stark reminder that a country with one of the world’s largest oil reserves still has major challenges delivering fuel to its people, writes Sebastian Abbot for the Associated Press.

The lines followed Iraq’s announcement Monday that it was opening six major oil fields and two natural gas fields to development by foreign firms, which could lead to the biggest outside stake in Iraq’s oil industry since it was nationalized more than 30 years ago.

Iraq said that it had failed to sign technical support deals with global oil majors hoping to cash in on boosting the war-torn country’s extensive but underexploited oilfields, Agence France Presse said.

Iraq is still negotiating with Shell, BP, ExxonMobil, Chevron and Total, and a consortium of other smaller oil companies, to develop six oil blocks and two gas fields, Oil Minister Hussein al-Shahristani told a press briefing.

“We did not finalise any agreement with them because they refused to offer consultancy based on fees as they wanted a share of the oil,” he said.

Iraq’s government invited foreign firms to help boost the production of the country’s major oil fields, beginning a global competition for access to the world’s third-largest reserves, Sudarsan Raghavan and Steven Mufson write for The Washington Post.

Iraqi Oil Minister Hussain al-Shahristani said the government would seek to tap Western technology and capital to increase Iraqi oil production by about 60 percent, or approximately 1.5 million barrels a day, swelling Iraqi oil revenue and potentially easing tight petroleum markets where prices have doubled in the past year.

Shahristani said 35 companies — including firms from the United States, Britain, France, Russia, China and India — had been selected to bid on long-term contracts to provide services, equipment, training and advice on the country’s biggest oil fields, which have suffered from age, technological neglect and mismanagement during years of war and economic sanctions.

“The six oil fields that have been announced today are the backbone of Iraq’s oil production, and some of them are getting old and production is declining,” Shahristani told reporters.

Norway’s DNO International, the first foreign firm to drill for oil in Iraq after the U.S.-led invasion in 2003, said on Tuesday it was not pursuing any of the oil projects offered by Baghdad, Reuters reports.

DNO, which is producing oil in Iraq’s Kurdish region in the north, was not on a list of pre-qualified bidders for projects in other areas of Iraq published on Monday.

On Tuesday, some Norwegian media suggested that may mean DNO was no longer welcome in Iraq, DNO said in a statement. Shares in DNO were down 5 percent at 10.10 crowns at 1106 GMT.

An epic struggle for access to the world’s third-largest oil reserves is under way in Iraq, underscoring, and at times exacerbating, the sectarian violence gripping much of the country.

At stake is the development of 115 billion barrels of proved oil reserves and 112 trillion cubic feet of gas, as well as access to numerous exploration prospects by international oil companies that increasingly are being shut out of the world’s most prospective hydrocarbon provinces amid a rising tide of resource nationalism, Tamsin Carlisle writes in The National.

The Iraqi government is to establish a new oil company with a proposed capital of more than $7.9 million and converting Maysan oil fields into a public company and disassociating it from the South Oil CompanySouth Oil Company

In a statement to KUNA, Iraqi Oil Minister Hussein Al-Shahrastani said that the cabinet approved the establishment of the oil company in the governorate of Maysan under the name (Maysan Oil Company).

“It would be tasked to develop the fields and production in the province,” Al-Shahrastani said, noting that the Oil MinistryOil Ministry Loading… had submitted a proposal to the cabinet on that regard, which received government blessing.

The Kurdistan Regional Government of Iraq announced the publication of a fact-finding report by the internationally renowned expert on petroleum fiscal regimes, Dr Pedro van Meurs, which finds that the Production Sharing Contract model currently applied by the KRG (KRG-PSCs) is immensely better for Iraq’s national interests than the Risk Service Contracts (EDP-RSCs) that have been proposed by the Ministry of Oil (MOO) in Baghdad.

In his report ‘Comparative analysis of Ministry of Oil and Kurdistan fiscal terms as applied to the Kurdistan Region’, prepared for leading international law firm Clifford Chance at the request of the KRG, Dr. van Meurs warns, “If profitability to the investors is not aligned with the goals of the government, very significant losses can occur to the value of government revenues.”

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