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Oil Majors Seek Slice of Post-Saddam Cake
Paris [AFP]....

As the growing beat of war drums sounds the threat of war in Iraq, international oil majors and their governments are preparing for the battle to stake claims on Iraq’s vast oil reserves, the second-biggest in the world. Iraq has promised mainly French, Russian and Chinese companies, led by TotalFinaElf and LUKoil, the prime choice of developing the country’s massive but neglected oil resources, although questions are being raised whether such arrangements would be honored in a post-Saddam Iraq. UN sanctions have starved the Iraqi oil sector of the 30 billion to 40 billion dollars in investment calculated to be necessary to rebuild and develop the country’s oil deposits, stirring oil companies’ appetites for a piece of the expected action. Analysts at Deutsche Bank said in a research report: "We doubt that the Russian, French and Chinese governments would completely surrender their economic interests, and that support (or lack of opposition) to US military action may well come at the price of a proviso that they would have a post-Saddam economic role." Royal Institute of International Affairs researcher Valerie Marcel agreed, saying in a recent study: "A key issue for all the companies that have invested time to negotiate these contracts has been whether the agreements currently in place will survive a change of regime in Iraq."

"In the event of an invasion, the future of these agreements may hinge on the result of negotiations with the United States and their countries’ support for US policy in Iraq," Marcel said. French oil giant TotalFinaElf, which had been active in Iraq for decades even before the current sanctions, is in the pole position to lead the scramble into a post-Saddam Iraq, having initialed potentially lucrative agreements for two of Iraq’s most promising fields. TotalFinaElf head of exploration and production, Pierre de Margerie, said recently: "Once the situation is clarified, we hope to have a chance to defend our position." The biggest Russian oil company, LUKoil, had signed a contract to develop the vast West Qurna field although last week Iraq said it had made a "final decision" to cancel the contract because "over the past three years the Russian firm has not invested one dollar in the project," interim Iraq oil minister Samir Abdul al-Nejm said February 10. However, Iraq has engaged numerous other group’s from Russia and elsewhere about developing its oil resources. But US oil firms have been notably absent, having been excluded from Iraq’s huge oil reserves since the end of the 1980s when Washington-Baghdad relations deteriorated.

A recent report by the Council on Foreign Relations, a US think-tank, and the James A. Baker III Institute for Public Policy at Rice University warned against legal haggling between companies that have agreements with Iraq and those that are likely to want to get in on the game. "Prolonged legal conflicts over contracts could delay the development of important fields in Iraq and hamper a new governments ability to expand production. "It may be advisable to pre-establish a legitimate (preferably UN mandated) legal framework for vetting pre-hostility exploration agreements," it recommended. The stakes in a legal battle for shares in Iraq’s oil sector are huge given the country’s vast reserves. Sizing up Iraq’s oil resources, the US Department of Energy says in a country brief: "Iraq contains 112 billion barrels of proven oil reserves, the second largest in the world (behind Saudi Arabia) along with roughly 220 billion barrels of probable and possible resources. "Iraq’s true resource potential may be far greater than this, however, as the country is relatively unexplored due to years of war and sanctions," it says, adding that country’s oil production costs are also among the lowest in the world, "making it a highly attractive oil prospect."

 

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