They controlled Iraqi oil flows until Baghdad showed them the
door 30 years ago. Now Western multinationals are longing for a second shot at
Iraq's vast untapped oilfields. Whether sanctions are removed by a US-led war or
UN weapons inspections, the world's top oil companies are hungry for access to
Iraq's 112 billion barrels of reserves. (AFP photo)...
Anti-West backlash awaits oil firms
By Peg Mackey www.dawn.com
DUBAI: They controlled Iraqi oil flows until Baghdad showed them the door 30
years ago. Now the Western multinationals are longing for a second shot at
Iraq's vast untapped oilfields when the country is free of UN sanctions.
Whether sanctions are removed by a US-led war on Baghdad or United Nations
weapons inspections, the world's top oil companies are hungry for access to
Iraq's 112 billion barrels of reserves, second only to Saudi Arabia. But bitter
experience with Western majors has made Iraqi executives wary of foreign
influence in its oil sector, the lifeblood of its national economy.
"Nobody will take Iraq for a ride again," said a veteran Iraqi oil
industry source. "Do foreign oil companies expect to be given
production-sharing contracts after their governments use aggression on us? We
want to do things ourselves."
That strong sense of self-reliance already has inspired Iraqi officials to
rebuild their industry from the ashes of the 1991 Gulf War while under 12 years
of UN sanctions.
Although admiring Iraq's resourcefulness, Western oilmen hope to see a radical
change in its go-it-alone mentality when and if the country finally opens up.
"We've always been up against a high degree of nationalism in Iraq. But
reality must now be faced," said a top Western oil executive working in the
Middle East. "Iraq is on its knees and needs the international oil
companies for their technology, cash and management."
Several billion dollars and cutting-edge Western technology are required just to
boost Iraqi capacity by one million barrels per day (bpd) from its three million
BITTER LEGACY: Many Iraqis still bear a grudge after British, American and
French oil companies controlled their oil industry for half a century through
the Iraq Petroleum Co (IPC).
It was an era when Western majors working in the Middle East used oil output and
prices as an economic and political tool, analysts said.
From the time it struck oil at the huge Kirkuk field in 1927 until nationalism
forced it out in 1972, IPC - made up of BP, Exxon, Mobil, Shell, CFP (Total) and
Partex - ruled the roost.
That did not sit well with Baghdad, which resented IPC's control over its
revenues. And Baghdad felt cheated when IPC invested heavily in Iran and Saudi
Arabia, at the expense of Iraq where output stagnated.
"BP and other companies felt Iraq was not a stable state where their
investment would be protected in the long term," said Mustafa Alani, a
London-based Iraqi analyst.
"The idea was to keep investment at a minimum in Iraq and build up Saudi
Arabia, Iran and other Gulf countries where they believed prospects for
political stability were higher."
Fed up with what Baghdad saw as IPC's lack of drive, Iraq revoked 99.5 per cent
of the company's territory in the early 1960s. Relations between the two sides
The net result was that after nearly 50 years in Iraq, IPC left the country
pumping 1.7 million bpd in the early 1970s.
Less than a decade later, and under its own steam, Iraq hiked capacity to 3.8
million bpd. In this short time Iraq found the prized Majnoon, West Qurna, Bin
Umar and Halfaya oilfields.
EXPLOITING POTENTIAL: Those were the heady days of Iraqi oil. By contrast, the
last two decades have seen war and sanctions battering its infrastructure and
preventing development of many huge finds.
But mindful of its untapped wealth, Iraq under President Saddam Hussein has
planned for the day it can reach six million bpd by drawing up a $20 billion
development scheme which features 11 prime oilfields and assumes foreign
Deals in principle have been agreed with firms from countries showing political
support - Russia, China and France. But some analysts say Iraq uses such
agreements primarily as a means to punish the United States and bust sanctions.
Indeed, frustration with Russia and China for failing to start work on West
Qurna and al-Ahdab, respectively, has left Baghdad threatening to rip up the
Iraq's investment gameplan could change completely if sanctions are lifted or
the United States succeeds in ousting Saddam for his alleged weapons of mass
destruction. But even the most open-minded, Western-leaning Iraqi technocrats
are likely to drive a hard bargain.
"Iraqi oil officials do not see themselves as backward or disadvantaged and
having to give away the store," said Amy Jaffe, President of AMJ Energy
Consulting in Houston. "But if the government feels desperate for
investment, terms would have to be commercial to get deals done
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