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Iraq’s failed oil story
Alsir Sidahmed
Sunday 14 April 2013
A fifth oil bid planned for this year in Iraq will offer hints to its future economic and political path.
It carries more weight as that bid coincides with the 10th anniversary of the US-led invasion of Iraq back in 2003 that many thought was driven mainly by oil interests.
Iraq has managed to raise its proven reserves from the old known figure of 115 billion barrels to 141 billion barrels to consolidate its position as the fifth country worldwide in terms of reserves.
It has also been able to increase its production to 3 million barrels a day last year and replace Iran as the second biggest oil producer within the Organization of Petroleum Exporting Countries after Saudi Arabia.
Still, the most conspicuous fact is the absence of the American oil companies from its scene.
The political debacle engulfing the country, which is running along sectarian and ethnic lines, is having its impact on the oil industry, which interestingly enough is distributed along the same disputed lines geologically.
And if the past three bid rounds were any guide, the expected fifth one is unlikely to produce a different result.
Between the first bid round held in 2009 and the fourth held last May it became clear how the domestic scene is impacting negatively on the industry.
From big names in the world oil industry showing up for the first bid like ExxonMobil, Eni, Royal Dutch Shell, CNPC of China and British Petroleum, the last round saw the presence of Pakistan Petroleum, Kuwaiti Energy and the Russian Luk Oil.
Moreover, some of the reputable names like ExxonMobil and Statoil of Norway opted to leave Baghdad following its row with the Kurdistan Regional Government (KRG).
The central government in Iraq was insisting that all oil deals with foreign companies should be negotiated and sealed with Baghdad and that its export system should be used to transport any crude produced anywhere in Iraq to world markets.
The-semi autonomous Kurdistan region did not like this idea and went ahead signing its own deals and even trucking small amounts of crude through Turkey to international markets and was even able to halt its production for four months last year following a row with Baghdad.
Interesting enough, big players such as ExxonMobil opted to side with Irbil against Baghdad despite threats from the central government that those dealing with KRG risk losing access to its lucrative contracts.
Kurdistan contains only a small portion of the known Iraq’s proven oil reserve of 4 billion barrels, but KRG disputes that and says reserves in the region may go up to 45 billion barrels, in addition to legal clarity that governs the business environment and relative political stability compared to the scene in Baghdad.
All that encouraged many foreign companies to take their chances and side with KRG.
Yet conditions in Kurdistan do not provide a quick and easy ride either given the political dimension.
KRG’s only hope is to strike a deal with Turkey to export oil produced in its territory.
But such a deal will help strengthen the resolve of the Iraqi Kurds to drop their current autonomous garment and look for independence now that they control their finances and their region is secured by their own army.
That will not be an easy situation for Ankara to live up with.
It has its own Kurds problem that it has been battling with for years and it is still not clear how to settle it.
Helping KRG export its oil will have its ramifications and ripple effect within Turkey’s own territory.
The failure of the central government in Baghdad in settling the issue of the Hydrocarbon Law for more than five years became a very frustrating issue as companies were confused on the legal framework of their operation.
Add to this the severe impact of sanctions on the industry infrastructure in terms of pipelines, export facilities and so on, which curtailed the potential for increasing Iraqi oil output.
Besides, there is the old issue of limited export potential given Iraq’s geographical location and its ongoing territorial disputes with both Iran and Kuwait that have in effect put a ceiling to what it could do to raise its exports.
The US Newcons, who pushed the Bush administration to invade Iraq were hoping that the country’s oil industry will foot the bill of that ill-conceived invasion, bring Iraq out of the cold of isolations and sanctions to be a model for a new Middle East, not only democratic and at peace with itself and neighbors but also help undermine OPEC to be able to provide a serious challenge and an alternative to oil producing countries that don’t toe the line and help reduce prices to consumers.
But the invasion ended up in a grave strategic mistake that has impacted negatively on the US standing in the world and its position as a leading power and now Iraq is failing 10 years later in utilizing its huge oil potential.
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Alsir Sidahmed
Sunday 14 April 2013
A fifth oil bid planned for this year in Iraq will offer hints to its future economic and political path.
It carries more weight as that bid coincides with the 10th anniversary of the US-led invasion of Iraq back in 2003 that many thought was driven mainly by oil interests.
Iraq has managed to raise its proven reserves from the old known figure of 115 billion barrels to 141 billion barrels to consolidate its position as the fifth country worldwide in terms of reserves.
It has also been able to increase its production to 3 million barrels a day last year and replace Iran as the second biggest oil producer within the Organization of Petroleum Exporting Countries after Saudi Arabia.
Still, the most conspicuous fact is the absence of the American oil companies from its scene.
The political debacle engulfing the country, which is running along sectarian and ethnic lines, is having its impact on the oil industry, which interestingly enough is distributed along the same disputed lines geologically.
And if the past three bid rounds were any guide, the expected fifth one is unlikely to produce a different result.
Between the first bid round held in 2009 and the fourth held last May it became clear how the domestic scene is impacting negatively on the industry.
From big names in the world oil industry showing up for the first bid like ExxonMobil, Eni, Royal Dutch Shell, CNPC of China and British Petroleum, the last round saw the presence of Pakistan Petroleum, Kuwaiti Energy and the Russian Luk Oil.
Moreover, some of the reputable names like ExxonMobil and Statoil of Norway opted to leave Baghdad following its row with the Kurdistan Regional Government (KRG).
The central government in Iraq was insisting that all oil deals with foreign companies should be negotiated and sealed with Baghdad and that its export system should be used to transport any crude produced anywhere in Iraq to world markets.
The-semi autonomous Kurdistan region did not like this idea and went ahead signing its own deals and even trucking small amounts of crude through Turkey to international markets and was even able to halt its production for four months last year following a row with Baghdad.
Interesting enough, big players such as ExxonMobil opted to side with Irbil against Baghdad despite threats from the central government that those dealing with KRG risk losing access to its lucrative contracts.
Kurdistan contains only a small portion of the known Iraq’s proven oil reserve of 4 billion barrels, but KRG disputes that and says reserves in the region may go up to 45 billion barrels, in addition to legal clarity that governs the business environment and relative political stability compared to the scene in Baghdad.
All that encouraged many foreign companies to take their chances and side with KRG.
Yet conditions in Kurdistan do not provide a quick and easy ride either given the political dimension.
KRG’s only hope is to strike a deal with Turkey to export oil produced in its territory.
But such a deal will help strengthen the resolve of the Iraqi Kurds to drop their current autonomous garment and look for independence now that they control their finances and their region is secured by their own army.
That will not be an easy situation for Ankara to live up with.
It has its own Kurds problem that it has been battling with for years and it is still not clear how to settle it.
Helping KRG export its oil will have its ramifications and ripple effect within Turkey’s own territory.
The failure of the central government in Baghdad in settling the issue of the Hydrocarbon Law for more than five years became a very frustrating issue as companies were confused on the legal framework of their operation.
Add to this the severe impact of sanctions on the industry infrastructure in terms of pipelines, export facilities and so on, which curtailed the potential for increasing Iraqi oil output.
Besides, there is the old issue of limited export potential given Iraq’s geographical location and its ongoing territorial disputes with both Iran and Kuwait that have in effect put a ceiling to what it could do to raise its exports.
The US Newcons, who pushed the Bush administration to invade Iraq were hoping that the country’s oil industry will foot the bill of that ill-conceived invasion, bring Iraq out of the cold of isolations and sanctions to be a model for a new Middle East, not only democratic and at peace with itself and neighbors but also help undermine OPEC to be able to provide a serious challenge and an alternative to oil producing countries that don’t toe the line and help reduce prices to consumers.
But the invasion ended up in a grave strategic mistake that has impacted negatively on the US standing in the world and its position as a leading power and now Iraq is failing 10 years later in utilizing its huge oil potential.
[You must be registered and logged in to see this link.]
