Future of Iraq: The spoils of war

[jpak]

http://news.independent.co.uk/world/middle_east/article2132569.ece

How the West will make a killing on Iraqi oil riches

raq's massive oil reserves, the third-largest in the world, are about to be thrown open for large-scale exploitation by Western oil companies under a controversial law which is expected to come before the Iraqi parliament within days.

The US government has been involved in drawing up the law, a draft of which has been seen by The Independent on Sunday. It would give big oil companies such as BP, Shell and Exxon 30-year contracts to extract Iraqi crude and allow the first large-scale operation of foreign oil interests in the country since the industry was nationalised in 1972.

The huge potential prizes for Western firms will give ammunition to critics who say the Iraq war was fought for oil. They point to statements such as one from Vice-President Dick Cheney, who said in 1999, while he was still chief executive of the oil services company Halliburton, that the world would need an additional 50 million barrels of oil a day by 2010. "So where is the oil going to come from?... The Middle East, with two-thirds of the world's oil and the lowest cost, is still where the prize ultimately lies," he said.

Oil industry executives and analysts say the law, which would permit Western companies to pocket up to three-quarters of profits in the early years, is the only way to get Iraq's oil industry back on its feet after years of sanctions, war and loss of expertise. But it will operate through "production-sharing agreements" (or PSAs) which are highly unusual in the Middle East, where the oil industry in Saudi Arabia and Iran, the world's two largest producers, is state controlled.

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and more...

Leading article: The oil rush

http://comment.independent.co.uk/leading_articles/article2132500.ece

"The oil can is mightier than the sword," said the 19th-century US Senator Everett Dirksen. Nowhere does this seem more true than in contemporary Iraq where, despite widespread despair about the war's costs in terms of blood and treasure, US corporations look set to be some of the conflict's few winners. The announcement that the Iraqi government is planning to change its constitution to allow foreign extraction of oil will give Western companies access to the world's third largest oil reserves. Production sharing agreements (PSAs), lasting for up to 30 years, will divert up to 75 per cent of Iraqi oil revenues to Western drilling companies until their initial investment costs have been recouped. The importance of this cannot be overstated for a shattered country still reliant on oil for 95 per cent of its income.

Of course, the Iraqi oil industry, starved through years of sanctions and now under constant insurgent attack, badly needs Western investment. Only a small proportion of Iraq's known oil fields have been developed, and production still languishes below pre-invasion levels. The neo-conservative dream - indulged in by Paul Wolfowitz and Dick Cheney prior to the conflict - that the invasion and reconstruction would be self-financed through a twist of the oil taps, dissipated long ago.

In a country where unemployment has hit 70 per cent, a policy that will quicken the pace of economic reconstruction should be universally welcomed. At face value, the measure is not being imposed by the fiat of a US general: it will be voted on in the Iraqi parliament and, if passed, enacted by a democratically elected government. And objections that foreign companies will steal Iraq's birthright seem faintly anachronistic in the global economy: specialist engineering is an international industry these days, and Iraq's command economy, isolated from the rest of the world, urgently requires liberalisation.

But it doesn't demand the fevered imaginings of a conspiracy theorist to think that this law, struck while the beleaguered Iraqi government is facing opposition from all quarters, protects the interests of oil wealth (which is so well represented in the White House) more than it does the Iraqi people. Production sharing agreements don't apply in most other major Middle Eastern oil producers because they are widely thought to grant greater control to companies than governments. With economies so heavily dependent on oil, it's hard to see how countries can truly be self-governing if they sign away influence over their almost exclusive source of wealth.

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[whistle]

1. Actual costs to extract oil at the well head is less than $1.00 per barrel

...plus peak oil does not mean we have reached a point wher we have used up more oil than what may be left to extract. In fact, of all of the oil which exists throughout the world, only 15% has been extracted and used. The remaining 85% still lies under the earth and water wisting only to be extracted when needed. No, peak oil means we have passed over the point of the cheap means of extraction. From now on the costs at the well head will rise from this base cost of less than $1.00. By how much these costs will rise depends on many factors. But the greatest of these factors will continue to be imperialistic power, political corruption and corporate greed.

http://www.thepeakist.com/category/peak-oil/