Oil Companies Big Winners in Iraq War

Western oil producers have emerged as the big winners of the Iraq war.

"Prior to the 2003 invasion and occupation of Iraq US and other western oil companies were all but completely shut out of Iraq's oil market," industry analyst Antonia Juhasz told Al Jazeera wire service. "But thanks to the invasion and occupation, the companies are now back inside Iraq and producing oil there for the first time since being forced out of the country in 1973."

"Western producers like BP, Exxon Mobil, and Shell are enjoying their best access to Iraq's southern oil fields since 1972," Business Week noted in its issue of March 4th of last year.  (1972 was the year Saddam Hussein nationalized Iraq's oil fields.)

Business Week quotes Andy Inglis, BP's chief executive for exploration and production as saying, "We see this as the beginning of a long-term relationship with Iraq and will continue to look for further opportunities."

Dr. Abdulhay Yahya Zalloum, an international oil consultant and economist, agrees the western firms have won contracts despite "a lack of transparency and clarity of vision regarding the legal issues." The Iraqi government "gave a little piece of the cake for China and some of the other countries and companies to keep them silent."

A group led by BP will receive $2 billion per year to develop Iraq's Rumalia field and a Shell-led group is to get $913 million per year. An Exxon-led group is to get $1.6 billion per year, Bloomberg News reports. Each calculation is based on the agreed-to per-barrel fee times the maximum production level, Bloomberg explains.

David Bender, a Middle East analyst at Eurasia Group, Washington, D.C., told Bloomberg, "Iraq is one of the most attractive oil markets in the world. The international oil companies may feel that getting in at the beginning improves their long-term prospects."

The only area of Iraq where oil firms fare better than fee-for-service work is in the northern Kurdish autonomous region(KRG) where businesses including Norway's DNO International ASA are pumping crude under production-sharing agreements "not recognized by the central government," Bloomberg reports.

It also turns out Hunt Oil Co., of Dallas, Tex., clinched a separate deal in Sept., 2007,  with Iraq Kurdistan Regional Government. Hunt might not have won if its chief officer, Ray Hunt,  was not President George W. Bush's friend and a major fund-raiser. Some folks think, according to a front page New York Times report July 3, 2008, the deal "runs counter to American policy and undercut Iraq's central government." Apparently, Bush didn't think so. Baghdad reportedly is furious over it.

Hunt got this free pass to explore Kurdistan's oil riches in Sept., 2007, when it inked an exploration pact likely to give the firm a share of the boodle of any future gushers. "Hunt would be the first U.S. company to sign such a deal," a State Department official told the New York Times. And according to reporter Jay Price of McClatchy News Service, the Iraqi oil minister, speaking for Baghdad, "called the Hunt deal illegal."

A State Department cable dated Sept. 12, 2007, and made public by Wikileaks, "detailed official warnings from the U.S. government that the contract, regardless of lease location, is legally risky due to unresolved land and oil disputes between Baghdad and the KRG---and that such a contract could further amplify conflicts between the central and regional governments," wrote Ben Lando of the authoritative "Iraq Oil Report" Aug. 25, 2011. Hunt seemingly would not have to press Bush hard for the insider's deal.

Juhasz says that ExxonMobil, BP, and Shell aggressively lobbied their governments "to ensure that the invasion would result in an Iraq open to foreign oil companies" and that "they succeeded."

She added that the U.S. and western oil companies and their governments has been lobbying for a new national Iraq Oil Law that would largely privatize the oil market along the lines of the old Production Sharing Agreements---although such PSA's have been rejected in most countries because they provide "far more benefits to the foreign corporation than to the domestic government." Hunt's deal with KRG was of the PSA sort.

"The public is against privatization," Juhasz told al-Jazeera, "which is one reason the (Iraqi Oil Law) has not passed. The contracts are enacting a form of privatisation without public discourse and essentially at the butt of a gun. These contracts have all been awarded during a foreign military occupation with the largest contracts going to companies from the foreign occupiers' countries. It seems that democracy and equity are the two largest losers in this oil battle."

Note: the Obama regime "continues to pressure Baghdad to pass the Iraq Oil Law" over the wishes of the majority of the Iraqi people. "Thus far," Juhasz said, "it has required a massive foreign military invasion and occupation to grant the foreign oil companies the access they have thus far garnered."

Meanwhile, back at the pump, the boost in oil supplies has not reduced the price of oil being extracted from American motorists. The laws of supply and demand no longer appear to be working. According to business writer John Egan of Technorati, the average price for a gallon of gas last Feb. 26th climbed to $3.33, compared with $2.70 the previous year. And wire service Agency France Presse(AFP) reports in the Waynesville, Va., Augusta Free Press  that " Average U.S. gasoline prices began 2012 just under $3.28 gal, the highest number ever to mark the beginning of a year and the fifth straight weekly increase in price."