Today’s Must ReadMore than five years after the U.S. invasion of Iraq, the western alliance of big oil firms is making its final move on Mesopotamian oil reserves.
The New York Times reports today that the Iraqi government will soon announce the award of no-bid oil service contracts with a coalition of western oil companies, marking the first legal agreement between big oil and the post-Saddam Iraqi government.
The no-bid contracts are unusual for the industry, and the offers prevailed over others by more than 40 companies, including companies in Russia, China and India. The contracts, which would run for one to two years and are relatively small by industry standards, would nonetheless give the companies an advantage in bidding on future contracts in a country that many experts consider to be the best hope for a large-scale increase in oil production.
The Times notes the four main companies — the Texas-based Exxon Mobile, British BP, Total of France and Royal Dutch Shell, which has its headquarters in the Netherlands — were the four companies that made up the Iraq Petroleum Company that Saddam Hussein ousted when he nationalized Iraq’s oil resources in 1968.
According to the Times, “It is not clear what role the United States played in awarding the contracts.”
To be sure, the companies are somewhat disappointed that this is how they have to return to Iraq. The companies and the Bush Administration for years pushed the Iraqis to accept a so-called Hydrocarbon Law that would permit Production Sharing Agreements for the oil companies. That was among the so-called “benchmarks” that Bush enumerated at the outset of the “surge” in early 2006.
The PSA’s are often called “colonial” style agreements that permit western oil companies to exert a lot of control over a nation’s subterranean resources. Few countries still use them, as most, like Venezuela and Russia, demand more control over their own oil.
These no-bid deals were probably as good as the companies could expect.
The no-bid deals are structured as service contracts. The companies will be paid for their work, rather than offered a license to the oil deposits. As such, they do not require the passage of an oil law setting out terms for competitive bidding. The legislation has been stalled by disputes among Shiite, Sunni and Kurdish parties over revenue sharing and other conditions.
And it gives the Western oil giants a leg up on companies like the Russian-run Lukoil, which lost out big after the U.S. invasion.
A clause in the draft contracts would allow the companies to match bids from competing companies to retain the work once it is opened to bidding, according to the Iraq country manager for a major oil company who did not consent to be cited publicly discussing the terms.
Oil has been a major source of strife in domestic Iraqi politics. Opposition to giving foreigners access to Iraq’s oil wealth has always been a critical motivation for followers of Moqtada al-Sadr, for example.
I wonder how this news will go over in Sadr City?
