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Iraqi Elites May Award Oil Contracts Before New Assembly Sits

by NewStandard Staff

In what looks like a pre-arranged fire sale, Iraq’s outgoing, unelected interim government may hand out lucrative petroleum deals to Western corporations.

Feb. 8, 2005 – Western oil interests are already jockeying for position to exploit Iraq’s massive petroleum reserves, and the country’s interim government appears poised to begin handing out major contracts even before the new, popularly elected assembly assumes authority in the next few weeks.

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Iraq’s undersecretary of oil, Ahmad Al-Shamaa, told Bloomberg News that the current, unelected cabinet may approve contracts worth hundreds of millions of dollars to private, foreign-owned corporations. Agreements may include deals worth a combined $450 million for development of the massive Suba-Luhais and Hamrin oil fields, intended to add about 100,000 barrels each to Iraq’s daily petroleum output.

The apparent enormity of oilfield development contracts notwithstanding, the sweetest deal reportedly on the table at present involves refinery construction. Corporations based in North America and Europe are attempting to secure "production-sharing" interests in a number of crude oil refineries planned for construction in relatively obscure parts of the still-embattled country, reports United Press International.

According to a US embassy official, who spoke to UPI on condition of anonymity, a $3 billion, two-year contract for construction of a "super refinery" to produce gasoline and other petroleum goods could also be announced before the new government sits in Baghdad.

Iraq’s oil infrastructure and reserves are still technically owned by the state, so foreign corporations’ best hope involves securing deals to build and co-manage facilities tapping, refining and exporting oil from the world’s second largest national reserve.

Heavy involvement in Iraq by the International Monetary Fund, also recently firmed up by the interim government, is expected to soften up current restrictions on foreign ownership of Iraq’s oil and other industries. As part of a widely criticized deal in which Iraq’s foreign debt accrued under Saddam Hussein was largely "forgiven" instead of nullified, Iraq’s foreign creditors and current rulers arranged for the IMF to help Iraqi leaders restructure the struggling nation’s economy to favor foreign investment and free markets.

And even though debt Hussein accumulated is considered valid, the fate of contracts the former dictator awarded to Russian and other foreign concerns remain up in the air, according to UPI. The interim government has declared the deals null and void, though the incoming assembly and the executive branch it establishes may reaffirm them.

In the meantime, UPI reports, Western firms are showering the Iraqi Ministry of Oil with gifts ranging from expensive software packages and training, to international trips and to cash.

Expressing concern that in a backroom process, American oil companies will be unable to compete with the kickbacks offered by international competitors, an anonymous embassy official told UPI that US advisors are encouraging Iraq to keep its bidding process open.

"If we go contract by contract, other companies will out-bribe the United States companies, and we will lose," said the official. Insisting the US favors a "fair, open, equal process," the official noted that "US companies have better technology" and thus the competitive edge, all else being equal.

But the official admitted that American corporations are trying their best regardless, with Shell, Exxon and Chevron each offering material incentives to earn favor from Iraqi officials.

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The NewStandard ceased publishing on April 27, 2007.


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