The Rush for Iraq’s Oil

Iraq is set to become one of the world largest exporters of oil after international companies accepted low fees to develop the country’s vast crude reserves.

Representatives of 44 oil companies ignored the recent devastating bomb attacks in Baghdad to cram into a hall in the Oil Ministry to bid for contracts to increase production in Iraq’s biggest oilfields.

The companies are so eager to get a foothold in the Iraqi oil sector that they are largely accepting tough Iraqi government terms, which many of them rejected at a previous auction in Baghdad six months ago.

The intense interest of the international oil industry in Iraq is fuelled by belief that it may have reserves, rivalling Saudi Arabia, which have gone unexploited or undiscovered during 30 years of war, rebellion and sanctions. The super-giant fields of south-east Iraq are the largest concentration of such fields in the world, according to experts.

Iraq desperately needs to increase its oil revenues to reconstruct the country as exports have remained at about two million barrels a day – fewer than the number under Saddam Hussein. By signing agreements with big oil companies Iraq intends to raise output from 2.5 million to 7 million barrels a day within six years.

At the start of the two-day auction at the end of last week  the energy giant Shell and Malaysia’s Petronas were awarded a contract to develop the massive Majnoon field in southern Iraq near the border with Iran. This has proven reserves of 12.58 billion barrels, but is currently producing only 45,000 barrels a day. Shell and Petronas have promised to raise output to 1.8 million barrels a day.

Given recent car bombs in Baghdad oil company officials had to leave their vehicles more than one mile away from the Iraqi Oil Ministry and make their way there on foot. Iraq’s oil reserves are mostly in southern Iraq around Basra, in areas which are overwhelmingly Shia and where security is far better than in the centre of the country. There were no bidders yesterday for the East Baghdad field, which is in areas that continue to see frequent clashes.

A striking feature of the oil auction this month is that oil companies are accepting fees for raising oil output which they rejected last June. The Iraqi oil minister Hussain Shahristani has adamantly refused to give companies a share in Iraqi oil production. Instead, they are paid a fee for raising output above an agreed level. In the case of Shell and Petronas this will be $1.39 (86p) a barrel, which beat an offer from Total of France and the Chinese firm CNPC of $1.75 to raise output to 1.405 million barrels a day.

The profits for the oil companies will be limited under contracts now being agreed, but they have evidently decided to accept this to secure an entry ticket to a potential Iraqi oil bonanza.

"The second round of bidding represents a new era in the history of the Iraqi oil industry," said the Prime Minister Nouri al-Maliki as he opened the auction. For once such hyperbole may be true because it will see foreign oil companies returning to Iraq en masse for the first time since oil was nationalised in 1972.

Iraqis are intensely suspicious that President Bush’s invasion of Iraq in 2003 was motivated by a plan to get hold of Iraqi oil. The government is intent on showing that it is not giving away control of Iraqi oil, the country’s only asset. "The old way was in darkened rooms, behind closed doors," said Mr Maliki. "But today what is happening is clear to everyone."

The success of the oil auction is crucial to the future of Mr Maliki because present oil revenues, at around $60bn a year are only just enough to pay salaries and government expenses. There is little left for development and reconstruction of the economy, ruined by continuing conflict and sanctions since the start of the Iran-Iraq war in 1980. Critics argue that Iraq’s own oil industry could have raised ouput by itself, but it is crippled by lack of money, organisation, equipment and personnel.

The Oil Ministry’s strategy seems to have paid off. In the first auction in June only BP and China’s CNPC were willing to accept a fee of $2 for each barrel of extra crude above a minimum production target produced in the super giant Rumaila, one of the largest oilfields in the world. But in recent weeks other big companies have followed suit. Mr Shahristani said: "They will not have a share of Iraqi oil, and our country will have total control over production."

PATRICK COCKBURN is the author of ‘The Occupation: War, resistance and daily life in Iraq‘, a finalist for the National Book Critics’ Circle Award for best non-fiction book of 2006. His new book ‘Muqtada! Muqtada al-Sadr, the Shia revival and the struggle for Iraq‘ is published by Scribner




More articles by:

Patrick Cockburn is the author of  The Rise of Islamic State: ISIS and the New Sunni Revolution.

March 19, 2018
Henry Heller
The Moment of Trump
John Davis
Pristine Buildings, Tarnished Architect
Uri Avnery
The Fake Enemy
Patrick Cockburn
The Fall of Afrin and the Next Phase of the Syrian War
Nick Pemberton
The Democrats Can’t Save Us
Nomi Prins 
Jared Kushner, RIP: a Political Obituary for the President’s Son-in-Law
Georgina Downs
The Double Standards and Hypocrisy of the UK Government Over the ‘Nerve Agent’ Spy Poisoning
Dean Baker
Trump and the Federal Reserve
Colin Todhunter
The Strategy of Tension Towards Russia and the Push to Nuclear War
Kevin Zeese - Margaret Flowers
US Empire on Decline
Ralph Nader
Ahoy America, Give Trump a Taste of His Own Medicine Starting on Trump Imitation Day
Robert Dodge
Eliminate Nuclear Weapons by Divesting from Them
Laura Finley
Shame on You, Katy Perry
Weekend Edition
March 16, 2018
Friday - Sunday
Michael Uhl
The Tip of the Iceberg: My Lai Fifty Years On
Bruce E. Levine
School Shootings: Who to Listen to Instead of Mainstream Shrinks
Mel Goodman
Caveat Emptor: MSNBC and CNN Use CIA Apologists for False Commentary
Paul Street
The Obama Presidency Gets Some Early High Historiography
Kathy Deacon
Me, My Parents and Red Scares Long Gone
Jeffrey St. Clair
Roaming Charges: Rexless Abandon
Andrew Levine
Good Enemies Are Hard To Find: Therefore Worry
Jim Kavanagh
What to Expect From a Trump / Kim Summit
Ron Jacobs
Trump and His Tariffs
Joshua Frank
Drenched in Crude: It’s an Oil Free For All, But That’s Not a New Thing
Gary Leupp
What If There Was No Collusion?
Matthew Stevenson
Why Vietnam Still Matters: Bernard Fall Dies on the Street Without Joy
Robert Fantina
Bad to Worse: Tillerson, Pompeo and Haspel
Brian Cloughley
Be Prepared, Iran, Because They Want to Destroy You
Richard Moser
What is Organizing?
Scott McLarty
Working Americans Need Independent Politics
Rohullah Naderi
American Gun Violence From an Afghan Perspective
Sharmini Peries - Michael Hudson
Why Trump’s Tariff Travesty Will Not Re-Industrialize the US
Ted Rall
Democrats Should Run on Impeachment
Robert Fisk
Will We Ever See Al Jazeera’s Investigation Into the Israel Lobby?
Kristine Mattis
Superunknown: Scientific Integrity Within the Academic and Media Industrial Complexes
John W. Whitehead
Say No to “Hardening” the Schools with Zero Tolerance Policies and Gun-Toting Cops
Edward Hunt
UN: US Attack On Syrian Civilians Violated International Law
Barbara Nimri Aziz
Iraq Outside History
Wilfred Burchett
Vietnam Will Win: The Long Hard Road
Victor Grossman
Germany: New Faces, Old Policies
Medea Benjamin - Nicolas J. S. Davies
The Iraq Death Toll 15 Years After the US Invasion
Binoy Kampmark
Amazon’s Initiative: Digital Assistants, Home Surveillance and Data
Chuck Collins
Business Leaders Agree: Inequality Hurts The Bottom Line
Jill Richardson
What We Talk About When We Talk About “Free Trade”
Eric Lerner – Jay Arena
A Spark to a Wider Fire: Movement Against Immigrant Detention in New Jersey
Negin Owliaei
Teachers Deserve a Raise: Here’s How to Fund It