Iraqi Oil Agreement Reveals the True Winners in Iraq

[tony mitra]

Here is an article from Mother Jones magazine, with links from various other source links within the document.
http://www.motherjones.com/washington_dispatch/2007/03/iraqi_oil_agreement.html
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Iraqi Oil Agreement Reveals the True Winners in Iraq
The new oil revenue-sharing agreement is a giveaway to Big Oil and could end up tearing apart the country.

James Ridgeway
March 01 , 2007

The Iraqi oil deal (http://www.washingtonpost.com/wp-dyn/content/article/2007/02/26/AR2007022600569.html) set to go before the country's parliament next month could spell the end of the country as a nation state, and signals a major Bush victory in the war. The proposed law not only opens the door to the big international oil companies, but offers them lucrative contract deals, and even a place on the national oil board that will run the industry.

The Byzantine scheme for dividing up oil revenues on the basis of population is little more than a facade for the biggest rip off of resources since the British barged into Mesopotamia more than a century ago.

This law sanctions contracts between Iraq's individual regions and foreign oil companies. It effectively puts an end to a nationalized petroleum industry that has provided most of the country's revenue. Over time, the oil revenues might sustain an independent Kurdistan, along with a Shia state, and a Sunni state (though the Sunnis don't have much oil, at least among the known Iraqi reserves). The law sets up a system that opens the door for foreign companies to make the country's oil policy. A new federal Oil and Gas Council is to assist the Council of Ministers, "in coordination with the producing provinces and regions." This council is to include the prime minister and other cabinet members, directors of the central bank, representatives from the various regions, and "executive managers from important related petroleum companies, including the national Iraqi oil company and the oil marketing company."

Thanks to Raed Jarrar (http://raedinthemiddle.blogspot.com/), you can read an English translation (http://www.al-ghad.org/2007/02/14/exclusive-the-official-draft-of-the-oil-and-gas-law-of-the-iraq-republic-15-jan-2007/) of the new law at Al-Ghad (http://www.al-ghad.org/), the "voice of the democratic left in Iraq."

The main opposition to the proposal comes from the federation of Iraq oil unions, whose president, Hasan Jum`ah `Awwad al-Asadi, Head of the Federation of Oil Unions (http://www.basraoilunion.org/), said in a February 6 speech that "We strongly warn all the foreign companies and foreign capital in the form of American companies against coming into our lands under the guise of production-sharing agreements."

Al-Asadi called the law "unbalanced," arguing that "it has been drafted in a great rush in harsh circumstances" and would set "region against region." Other opponents of the deal have formed a coalition (http://www.handsoffiraqioil.org/) led by the London-based group Platform (http://www.platformlondon.org/).

While the deal, on its face, splits up control of Iraq's oil among Kurds, Shia and Sunnis, the real power remains in the hands of international companies that will craft contracts with Iraq's regional entities and put up most or all of the money for exploration, development of infrastructure, and actual production, primarily through financial devices known as production sharing agreements. These agreements, which are not widely used in the industry, typically involve a public and a private partner, and stipulate that oil revenue will first go to the private partner to cover expenses and exploration costs. In Iraq, those costs are likely to be considerable since the industrial infrastructure will have to be rebuilt in many areas and much of the country's oil has not yet been mapped. Arguments between the parties will be settled by tribunals outside Iraq.

The new law would give the international companies the right to set the rates of production of each oil field. These fields are immense; a single one can account for 10 percent of the nation's budget.

"Sovereignty is surrendered with this law," Ewa Jasiecz of Platform, the London-based group that has followed the evolution of the new law, tells Mother Jones from London. "Their dealings are secretive, in English. Disputes will be settled by international tribunals in Paris or Geneva. They operate outside Iraqi law." (Platform has published an extensive critique of Iraqi oil politics here (http://www.carbonweb.org/showitem.asp?article=57&parent=4&link=Y&gp=3).)

Iraq currently has the second or third largest known oil reserves in the world; once completely mapped, it may turn out to have the largest reserves, period. These reserves will become more important over time because Saudi Arabia's reserves are now widely believed to have been overstated, and are in any case beginning to decline. In that context, private control of oil in Iraq — not a member of OPEC — also presents a serious challenge to whatever control OPEC still has over prices and production. People who say the United States lost the war are missing an important point. The oil companies may well be winning.

James Ridgeway is the Washington Correspondent for Mother Jones.

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So, any opinion folks ?
Cheers :)

[Pogo]

The good news, for those of us who oppose such unmitigated greed, is that oil production is highly susceptible to sabotage. If the bastards don't play fair, they're not likely to meet their quotas. Of coarse, they'll no doubt be using all the latest technology, taxpayer subsidized, to maintain security, but will it be enough? Is their a limit to how much killing they're prepared to do for the sake of profit?

Guess we'll just have to wait and see.

[NDNdancer]

This was a terrible deal when it was crafted and is still a terrible deal. It hasn't gone through yet and it looks to be falling apart as the Kurds in the north make their own deals.

The New York Times
September 13, 2007
Compromise on Oil Law in Iraq Seems to Be Collapsing
By JAMES GLANZ

BAGHDAD, Sept. 12 — A carefully constructed compromise on a draft law governing Iraq’s rich oil fields, agreed to in February after months of arduous talks among Iraqi political groups, appears to have collapsed. The apparent breakdown comes just as Congress and the White House are struggling to find evidence that there is progress toward reconciliation and a functioning government here.

Senior Iraqi negotiators met in Baghdad on Wednesday in an attempt to salvage the original compromise, two participants said. But the meeting came against the backdrop of a public series of increasingly strident disagreements over the draft law that had broken out in recent days between Hussain al-Shahristani, the Iraqi oil minister, and officials of the provincial government in the Kurdish north, where some of the nation’s largest fields are located.

Mr. Shahristani, a senior member of the Arab Shiite coalition that controls the federal government, negotiated the compromise with leaders of the Kurdish and Arab Sunni parties. But since then, the Kurds have pressed forward with a regional version of the law that Mr. Shahristani says is illegal. Many of the Sunnis who supported the original deal have also pulled out in recent months.

The oil law — which would govern how oil fields are developed and managed — is one of several benchmarks that the Bush administration has been pressing the Iraqis to meet as a sign that they are making headway toward creating an effective government.

Again and again in the past year, agreement on the law has been fleetingly close before political and sectarian disagreements have arisen to stall the deal.

One of the participants in Wednesday’s meeting, Deputy Prime Minister Barham Salih, who has worked for much of the past year to push for the original compromise, said some progress had been made at the meeting, but that he could not guarantee success.

“This has been like a roller coaster,” said Mr. Salih, who is Kurdish. “There were occasions where we seemed to be there, where we seemed to have closure, only to fail at that.”

“Given the seriousness of the issue, I don’t want to create false expectations, but I can say there is serious effort to bring this to closure,” he said.

The legislation has already been presented to the Iraqi Parliament, which has been unable to take virtually any action on it for months. Contributing to the dispute is the decision by the Kurds to begin signing contracts with international oil companies before the federal law is passed. The most recent instance, announced last week on a Kurdish government Web site, was an oil exploration contract with the Hunt Oil Company of Dallas.

The Sunni Arabs who removed their support for the deal did so, in part, because of a contract the Kurdish government signed earlier with a company based in the United Arab Emirates, Dana Gas, to develop gas reserves.

The Kurds say their regional law is consistent with the Iraqi Constitution, which grants substantial powers to the provinces to govern their own affairs. But Mr. Shahristani believes that a sort of Kurdish declaration of independence can be read into the move. “This to us indicates very serious lack of cooperation that makes many people wonder if they are really going to be working within the framework of the federal law,” Mr. Shahristani said in a recent interview, before the Hunt deal was announced.

Kurdish officials dispute that contention, saying that they are doing their best to work within the Constitution while waiting for the Iraqi Parliament, which always seems to move at a glacial pace, to consider the legislation.

“We reject what some parties say — that it is a step towards separation — because we have drafted the Kurdistan oil law depending on Article 111 of the Iraqi Constitution, which says oil and natural resources are properties of Iraqi people,” said Jamal Abdullah, a spokesman for the Kurdistan Regional Government. “Both Iraqi and Kurdish oil laws depend on that article,” Mr. Abdullah said.

The other crucial players are the Sunnis and Prime Minister Nuri Kamal al-Maliki. Some members of one of the main Sunni parties, Tawafiq, which insists on federal control of contracts and exclusive state ownership of the fields, bolted when it became convinced that the Kurds had no intention of following those guidelines.

But the prime minister’s office believes there is a simpler reason the Sunnis abandoned or at least held off on the deal: signing it would have given Mr. Maliki a political success that they did not want him to have. “I think there is a political reason behind that delay in order not to see the Iraqi government achieve the real agreement,” said Sadiq al-Rikabi, a political adviser to Mr. Maliki. Mr. Rikabi was at Wednesday’s meeting.

Ali Baban, who as a senior member of Tawafiq negotiated the compromise, said that allegation was untrue. “I have a good relationship” with Mr. Maliki, he said. “This is an issue of Iraqi unity. This could cause a split in this country.”

Mr. Maliki has suggested returning to the original language agreed to in February and trying once again to push the law through Parliament. Mr. Salih says there is basic agreement on returning to that language, but conceded that Sunni participants in Wednesday’s meeting might insist on a deal that includes changes to the Iraqi Constitution to safeguard their interests in the distribution of revenues. A law on how the revenue should be shared is being developed as a critical companion piece of legislation to the draft law.

The central element of the compromise was agreed to in February after months of difficult negotiations among Iraq’s political groups.

The main parties in those negotiations were Iraqi Kurds, who were eager to sign contracts with international oil companies to develop their northern fields; Arab Shiites, whose population is concentrated around the country’s southern fields; and Arab Sunnis, with fewer oil resources where they predominate.

Those facts meant that the compromise law had to satisfy both the Sunni insistence that the central government maintain strong control over the fields as well as the push by the Kurds and Shiites to give provincial governments substantial authority to write contracts and carry out their own development plans.

Somehow negotiators managed to strike that balance, but soon after, the agreement began to crumble. Many of the negotiations centered on a federal committee that would be set up to review the contracts signed with oil companies to carry out the development and exploitation of the fields. The Kurds objected to any requirement that the committee would have to approve contracts. So in a nuanced bit of language, the negotiators gave the committee the power only to reject contracts that did not meet precisely specified criteria.

But problems immediately cropped up after the cabinet approved the draft law and, in what seemed to be a perfunctory step, it went to a council that was supposed to hone the language to be sure it complied with Iraqi legal conventions.

When the draft emerged from that council, the members of some parties, particularly the Kurdish ones, thought that the careful balance struck in the draft had been upset, and they accused Mr. Shahristani of meddling. Then the law languished in Parliament and, said Hoshyar Zebari, the Iraqi foreign minister, the Kurds decided to send a signal that they would not wait indefinitely and signed the contract with Dana Gas.

“It served as a reminder: ‘If you keep stalling, life goes on,’ ” said Mr. Zebari, who is Kurdish.

On Monday the Kurdistan Regional Government, or K.R.G., issued another rejoinder to the oil minister’s views that the Kurds’ moves were illegal. “His views are irrelevant to what the K.R.G. is doing legally and constitutionally in Kurdistan,” the regional government said.

Mr. Shahristani was apparently traveling and did not respond to e-mail messages sent Wednesday. But Saleem Abdullah al-Juburi, a Tawafiq member who participated in Wednesday’s meeting, gave his own assessment of the Kurdish agreements with Hunt and Dana Gas. “The contracts are not legal,” he said.

Reporting was contributed by Ahmad Fadam, Ali Hamdani and Khalid al-Ansary from Baghdad, and an Iraqi employee of The New York Times from northern Iraq.

[Trish]

And Iraq's big oil contracts go to ...
Companies from China, India and other Asian nations are seen getting the first contracts. But don't write off Big Oil just yet.
By Steve Hargreaves, CNNMoney.com staff writer
April 5 2007: 1:42 PM EDT

NEW YORK (CNNMoney.com) -- Despite claims by some critics that the Bush administration invaded Iraq to take control of its oil, the first contracts with major oil firms from Iraq's new government are likely to go not to U.S. companies, but rather to companies from China, India, Vietnam, and Indonesia.

While Iraqi lawmakers struggle to pass an agreement on exactly who will award the contracts and how the revenue will be shared, experts say a draft version that passed the cabinet earlier this year will likely uphold agreements previously signed by those countries under Saddam Hussein's government.

"The Chinese could announce something within the next few months" if all goes well with the oil law, said James Placke, a senior associate at Cambridge Energy Research Associates who specializes in the Middle East.
Behind high oil and gas prices

The Asian firms are at an advantage for several reasons.

First, less constrained by Western sanctions during the Hussein regime, they've been operating in Iraq and know the country's oilfields, said Falah Aljibury, an energy analyst who has advised several Iraqi oil ministers as well as other OPEC nations.

Aljibury said the first contracts likely awarded will be to the Chinese in the south central part of Iraq, the Vietnamese in the south, the Indians along the Kuwaiti border, and the Indonesians in the western desert.

The contracts under consideration are small.

Aljibury said the Chinese agreement is to produce about 70,000 barrels of oil a day, while the Vietnamese one is for about 60,000.

It's hard to put a dollar amount on what those contracts might be worth, as security costs, drilling conditions and the exact terms to be offered by Baghdad are unknown, said Christopher Ruppel, a senior geopolitical analyst with the consulting firm John S. Herold.

But the barrel amount is tiny even by Iraq's depressed post-war production of around 2 million barrels a day.

And the country is thought to be able to ramp up production to over 3 million barrels a day with fairly little effort, providing the security situation improves. Rosy estimates even have Iraq producing 6 million barrels a day in the long term, which would make it the world's No. 4 producer behind Russia, Saudi Arabia and the United States.

But the Asian firms are also well positioned to grab further contracts.

Having avoided military entanglements in the region, they may curry more favor with the Iraqi people.

"They have no involvement with the secular or ethnic people," said Aljibury. "The conditions favor them."

Given its rapidly growing thirst for oil, combined with its feeling of isolation from world oil markets, China is sometimes viewed as more cavalier than Western oil firms when it comes to putting capital and people at risk. That could lead them to sign contracts in violent Iraq sooner than Western firms.

"The Chinese seem to be willing to go places where other companies can't find workers to go," said Adam Sieminski, chief energy economist at Deutsche Bank.

But none of this suggests Western firms like ExxonMobil (Charts), Chevron (Charts), BP (Charts) and Royal Dutch Shell (Charts) will be completely cut out of the action.

First, their technical prowess is world renowned.

"I have not heard anything from any Iraqi ministers against U.S. oil companies," said Aljibury. "In fact, I have heard the opposite. They are the best in field exploration and development. They want them."

Second, Iraq's oil contract game has just begun.

According to a letter supplied by John S. Herold's Ruppel, memorandums of understanding have been signed with all the oil majors for several years. And Iraqi Oil Minister Hussein al-Shahristani has said the country plans to tender for major oil projects in the second half of 2007.

Steve Kretzmann, executive director of Oil Change International, an industry watchdog group, criticized the draft oil law for allowing long-term oil contracts to be awarded to foreign oil firms, a practice he said was unique in the Middle East.

"Giving out a few crumbs to the Chinese and Indians is one thing," said Kretzmann, who noted the draft law was seen by both the Bush administration and the International Monetary Fund before it was given to Iraq's parliament. "But the real prize are the contracts that award long-term rights. I think the [Western oil companies] are biding their time."

http://money.cnn.com/2007/04/05/news/international/iraq_oil/index.htm


Wonder what all those Chinese, Indian and other Asian companies are going to think of the breakdown in the IRAQI compromise efforts?