Oil majors readying for battle over post-Saddam oil

Jacob Levich jlevich at earthlink.net
Mon Feb 17 06:07:28 MST 2003

Look for the US to endorse (quietly) an international mechanism for
deciding and administering oil concessions, after which France, Russia, and
Germany will get on board. Probably this move will be accompanied by a
readymade figleaf in the form of some new intelligence "revelation" about
Saddam and WMD. I would guess the revelation needn't be much more
persuasive than Powell's tatty Security Council briefing -- if the European
powers embrace it, so will the world press.


Middle East Online
Feb. 17, 2003
Oil majors readying for battle over post-Saddam oil
Iraq's vast oil reserves keep French oil giant TotalFinaElf in pole
position to lead fight in post-Saddam Iraq.
By Leigh Thomas - PARIS

As the growing beat of war drums sounds the threat of war in Iraq,
international oil majors and their governments are preparing for the battle
to stake claims on Iraq's vast oil reserves, the second largest in the world.

Iraq has promised mainly French, Russian and Chinese companies, led by
TotalFinaElf and LUKoil, the prime choice of developing the country's
massive but neglected oil resources, although questions are being raised
whether such arrangements would be honoured in a post-Saddam Iraq.

UN sanctions have starved the Iraqi oil sector of the 30 billion to 40
billion dollars in investment calculated to be necessary to rebuild and
develop the country's oil deposits, stirring oil companies' appetites for a
piece of the expected action.

Analysts at Deutsche Bank said in a research report: "We doubt that the
Russian, French and Chinese governments would completely surrender their
economic interests, and that support (or lack of opposition) to US military
action may well come at the price of a proviso that they would have a
post-Saddam economic role."

Royal Institute of International Affairs researcher Valerie Marcel agreed,
saying in a recent study: "A key issue for all the companies that have
invested time to negotiate these contracts has been whether the agreements
currently in place will survive a change of regime in Iraq."

"In the event of an invasion, the future of these agreements may hinge on
the result of negotiations with the United States and their countries'
support for US policy in Iraq," Marcel said.

French oil giant TotalFinaElf, which had been active in Iraq for decades
even before the current sanctions, is in the pole position to lead the
scramble into a post-Saddam Iraq, having initialled potentially lucrative
agreements for two of Iraq's most promising fields.
TotalFinaElf head of exploration and production, Pierre de Margerie, said
recently: "Once the situation is clarified, we hope to have a chance to
defend our position."

The biggest Russian oil company, LUKoil, had signed a contract to develop
the vast West Qurna field although last week Iraq said it had made a "final
decision" to cancel the contract because "over the past three years the
Russian firm has not invested one dollar in the project," interim Iraq oil
minister Samir Abdul al-Nejm said February 10.

However, Iraq has engaged numerous other groups from Russia and elsewhere
about developing its oil resources.
But US oil firms have been notably absent, having been excluded from Iraq's
huge oil reserves since the end of the 1980s when Washington-Baghdad
relations deteriorated.

A recent report by the Council on Foreign Relations, a US think-tank, and
the James A. Baker III Institute for Public Policy at Rice
University warned against legal haggling between companies that have
agreements with Iraq and those that are likely to want to get in on the game.

"Prolonged legal conflicts over contracts could delay the development of
important fields in Iraq and hamper a new governments ability to expand

"It may be advisable to pre-establish a legitimate (preferably UN mandated)
legal framework for vetting pre-hostility exploration agreements," it

The stakes in a legal battle for shares in Iraq's oil sector are huge given
the country's vast reserves.

Sizing up Iraq's oil resources, the US Department of Energy says in a
country brief: "Iraq contains 112 billion barrels of proven oil reserves,
the second largest in the world behind Saudi Arabia along with roughly 220
billion barrels of probable and possible resources.

"Iraq's true resource potential may be far greater than this, however, as
the country is relatively unexplored due to years of war and sanctions," it
says, adding that country's oil production costs are also among the lowest
in the world, "making it a highly attractive oil prospect."


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