By Lennox Samuels
Iraqi oil minister Hussain Al-Shahristani was expecting
to score a second triumph on the day American combat troops withdrew
from his nation's cities. But by the time bidding to develop eight
Iraqi oil and gas fields ended, he had only one potential deal in hand.
Shut out of Iraq's hydrocarbon industry for more than three decades,
foreign oil companies nevertheless declined to pursue development
contracts that were seen to be advantageous to Iraq, but not so good for them.
BP and
CNPC of China agreed to produce oil at the 17-billion-barrel Rumaila
field, accepting the government's offer of $2 a barrel for each
additional barrel the consortium extracts. The joint venture had sought
$3.99 a barrel. Reps from other companies, including Exxon, Shell and
30 others from 18 countries sat impassively, apparently underwhelmed by
the potential payoff. Shahristani made clear that Big Oil would be paid
a flat fee for their efforts and would be allowed no ownership stake in
any field.
For some, the government's posture was hubris.
Analysts said Shahristani provided oil companies little incentive to
bid, asking companies to spend heavily on development for very little
return. "They clearly went too far in not allowing any kind of
reasonable profit," said Sam Ciszuk, an energy analyst with IHS Global
Insight Middle East, in London. "There are huge risks - not only
financial, but legal and political."
And life-threatening, he could
have added. A just-released United Nations report states that most of
Iraq's oil fields are mined. The Ministry of Defense bans non-military
de-mining operations, meaning the oil companies will not be able to use
civilian contractors to clear any land mines. "One wonders whether oil
companies actually thought about this issue at all," a U.N. official
told NEWSWEEK. "It might take years before they even set foot on the
fields.
The companies' cool response could put a damper on Iraq's
economic-development plans, which hinge on oil. Dependent on crude,
Iraq has seen its budget decrease as per-barrel prices have dipped. The
loss in revenue even threatens funding for the Army and National
Police, which have inherited responsibility for security in urban areas
with American combat forces gone. "They need to learn to make better
deals," says a Western consultant to the Maliki government, who spoke
on condition of anonymity.
Shahristani said he expected production
on the eight fields to yield $1.7 trillion over 20 years. But the
Western companies would realize only a fraction of that. Given the lack
of enthusiasm, the oil minister ended Tuesday's session early. Matters
could get worse still: Even the BP/CNPC is no sure thing. No contracts
have been signed and there's no guarantee that the deal will go
forward, Ciszuk told NEWSWEEK. "Nobody's popping champagne corks in
London," he said.
At the opening of the session at Al-Rasheed Hotel,
Prime Minister Nuri al-Maliki was bullish. "Today we - Iraq, the Iraqis
- and the entire world will witness a round which might be unique of
its kind in the region," he stated. It appears he and his cabinet
should not count their oil barrels before they are filled.
