2nd Bid Round Results
There was certainly an unwarranted rush by the government to award all the fields included in both rounds totalling 27 although they could not get offers for some of the smaller ones and the reasons for Kirkuk and Bai Hassan are more related to Kurdish objections than anything else..
I do not attribute that to the wish of Maliky to gain popular support for the elections as the absolute majority of Iraqis are unaware of the implications and pay more attentions to necessaties of life. If any, many Iraqis resent the return of foreign oil companies. I will not rule out other reasons for pushing such awards and it will take a much larger space and time to argue..
To me all contracts must be approved by Parliament in accordance with Law 97 of 1967 to get legitimacy. This will leave the doors open for revoking these contracts in the future..
Economically speaking:
– Total production and total exports of oil will not increase during the three years except by 10%. I think national efforts ( with technical assistance) could make a larger contribution.
– There is a great doubt about the possibility of achieving the plateaus proposed by the oil companies and a figure of 12 mb/d is more of a fantasy, yet the companies will spend billions of dollars that must be repaid by Iraq regardless of actual production and export.
– Also, there will be the problem of export outlets. It is really doubtful, given the current political environment if Iraq can provide anything close to 5 mb/d. The two available outlets are the Arabian Gulf (with Iran & possibly Kuwait contesting Iraqi territorial waters) and Turkey.
– The Iraqis will not witness any benefit of such contracts before 2013, and in the meantime there is a bigger need to rehabilitate existing surface facilities as well as the forgotten downstream oil industry which will take longer periods to rehabilitate and upgrade. New refineries will not be added before 2016 at the earliest and Iraq will continue to import fuel for local consumption and power generation.
Many years of suffering and misery lie ahead.
Issam al-Chalabi
In response to Mr. I Chalabi’s comments, with all due respect I disagree with his remarks for the following reasons:
There is certainly warranted rush to award all the fields included in both rounds, and more to come; a wider perspective on the role of oil in Iraq’s future is being lost. After years of misrule and total bad management coupled with the effects of sanctions, and the post-2003 violence, Iraq has been left as the poorest Arab country. No-one would deny Iraq’s urgent need for investment.The country needs help from foreign firms to boost production because some of its major oil fields suffer from old age, previous bad reservoir management and need modern technology to check their deterioration.
The service contracts signed applicable for the first bid round will be limited to a maximum of 20 years, with the possibility for the IOCs to receive remuneration in kind for each produced barrel as well as cost fees, and not production contracts (preferred by big oil companies that give them a share of profits and allow them to book reserves).
Services Contracts concluded will be split into a rehabilitation phase, focused on arresting output declines in the major producing fields, and a development phase, in which production is raised to a defined target and sustained there for a certain number of years. Iraq deals with global oil majors to increase its crude oil production to 12 million barrels a day in six to seven years from now and not in 2013. Iraq is currently producing 2.5 million barrels a day, well below the level before the U.S.-led invasion in 2003. Iraq exports an average 1.9 million barrels a day. Iraq has potential to climb to third place or higher with an extension of the pipeline network and terminals they could reach the output level of the Saudis.
As for Kirkuk and Bai Hassan fields, “MoO” did get offers for these two fields from consortiums led by Shell and ConocoPhillips respectively, and because they could not meet the tough and hard terms of MoO, they walked away. It’s not related to Kurdish objections as Mr. I Chalabi indicated. no Iraqi person in his right mind doubt Kirkuk city (where these two field are located) is part of unified Iraq and not part of Iraq Kurdistan region.
Legality of contracts:
An oil law to establish the framework for foreign investment has been delayed for years by parliament, so Iraq is relying on valid legislation as the basis for awarding contracts. Parliamentary approval is not necessary as long as an elected government endorsed these services contracts, and the deals are constitutional, perfect in terms of developing Iraq damaged oil industry with lowest costs and must be respected at all times, even some traditional government critics stand behind the deals. The Law 97 of 1967 referred to by Mr. I Chalabi is irrelevant, not valid and obsolete. In this connection I quote a leading Iraqi lawyer Mr. Tareq Harb “There is no doubt all oil deals were made in accordance with valid laws, and the next government is obliged by all means to respect them,”
Export outlet etc..
Two export outlets were mentioned (Arabian Gulf and Turkey) and the fear of (Iran and possibly Kuwait contesting Iraqi territorial waters) but no mention of the Iraqi /Saudi Pipe line (IPSA), I wonder why? Has it been forgotten!! Or our brothers have confiscated it! Anyway Iraq is working on a “master plan” to construct new infrastructure including new pipelines and export terminals plus engineering contracts with Foster wheeler etc… to boost the country’s oil export capacity revealed recently to the press by Iraq Oil Minister on the sideline of a meeting of OPEC (in Angola).
I strongly believe Iraqi people should be optimistic and many years of their suffering will be over and prosperity lies ahead for them as long as democracy prevails and the people have their saying with no fear.
Abdulzahra