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Afternoon Open Thread: A Second Saudi Arabia |
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Mainstream media has shown sporadic and underwhelming interest in the Iraq Oil Ministry’s June 30 announcement that it is opening its oil fields to western development for the first time since 1972.
Yesterday, Nick Turse at TomDispatch posted an excellent account of why American media, and specifically the NY Times, is several years late in bringing us this story.
For reference here is the story that broke two weeks ago:
Four Western oil companies are in the final stages of negotiations this month on contracts that will return them to Iraq, 36 years after losing their oil concession to nationalization as Saddam Hussein rose to power.
Exxon Mobil, Shell, Total and BP — the original partners in the Iraq Petroleum Company — along with Chevron and a number of smaller oil companies, are in talks with Iraq’s Oil Ministry for no-bid contracts to service Iraq’s largest fields, according to ministry officials, oil company officials and an American diplomat….
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.
Note the extraordinary nature of the no-bid contracts:
The first oil contracts for the majors in Iraq are exceptional for the oil industry. They include a provision that could allow the companies to reap large profits at today’s prices: the ministry and companies are negotiating payment in oil rather than cash.
“These are not actually service contracts,†[one expert] said. “They were designed to circumvent the legislative stalemate†and bring Western companies with experience managing large projects into Iraq before the passage of the oil law.
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.
So basically, in the height of an energy crisis these companies have snuck in and secured for themselves what is likely the world’s largest, most lucrative remaining reserve of oil: the Iraqi fields. They have obtained contracts designed to bypass the democratic process, block out any competition, and lock-in historically high prices. And according to Turse, they did all of this with the help of the Bush Administration.
Here is how one energy analyst described the significance of these contracts:
Iraq is more than just about a handful of contracts in the early days….
Whoever goes in and starts drilling and starts adding production really doesn’t have to sink a huge amount of infrastructure. You’ve got easy fields and easy ways to get it out of the country….They’re working in existing reservoirs that are well mapped out and already connected to infrastructure. After [the first round of contracts,] when you’re talking about big deals, you could see an additional fresh million barrels per day added in under a year…and an extra million barrels per year every year for probably five or six years. And then all of a sudden you have a second Saudi Arabia.
Citing mostly matters of public record Turse’s piece explains just how the four oil companies came to be rewarded these crucial contracts. He spells out specifically the role of the Bush administration and the Pentagon in facilitating them, going right back to Dick Cheney’s notorious secret energy meetings (that included these companies) in 2001.
Definitely worth a read for anyone wanting to better understand this war.
Great article. You are something special little lady.