6 November 2006
Three-and-a-half years after the toppling of Saddam Hussein’s regime in Iraq, some companies that had high hopes of business opportunities are shutting up shop after suffering heavy losses.
US engineering giant Bechtel, which carried out $2.3 billion of work for the US in Iraq since April 2003, said last week that it was leaving the war-torn country after a spate of violence that killed 52 workers.
Bechtel was tasked with rebuilding roads and bridges, expanding the power grid, cleaning up water supply and installing communication lines. The company said it completed all but two of the 99 projects on its to-do list, but at the cost of 52 dead and 49 wounded.
Risk consulting firm Kroll Security International, a division of Marsh & McLennan, also announced last week that it was selling a subsidiary that provides security services in Iraq. In an earnings report, insurance firm Marsh & McLennan said Kroll planned to exit high-risk international assignments, which no longer fit its business strategy.
Kroll’s targeted clients were foreign firms looking at doing business in Iraq, including oil companies seeking a foothold ahead of their competitors. It offered on-the-ground security assessments and bodyguards to visiting and in-country executives. Judging that the business was not worth the risks, Marsh & McLennan said it was withdrawing its bodyguard teams and was exploring the sale of Kroll, because it had decided to refocus on consulting and training.
The departures effectively signal a no-confidence vote in Iraq’s business conditions, and raise a question mark over the Iraqi oil ministry’s aim of launching field development projects, particularly in the south.
Major oil companies have spent the last three years exploring ways to do business in Iraq and nurturing relations with past and present oil officials, but maintained physical distance as security analysts assessed the country too high a risk.
Iraqi Oil Minister Hussein al-Shahristani, who took over six months ago, has been trying to drum up interest, promising that a planned hydrocarbon law regulating investments would open the door to the signature of long-awaited deals. Last week he announced from Beijing that China National Petroleum Corp. had been invited to renegotiate a deal it signed in 1997 for development of the medium-sized Al-Ahdab field in southern Iraq.
The reality on the ground appears to belie the minister’s optimism. Southern Iraq — home to Al-Ahdab and many large oil fields awaiting development — remains mired in civil conflict between opposing groups of Shiites, the region’s dominant group.
Bechtel, which had to suspend work on a hospital in Basrah, southern Iraq, as rising security costs doubled the project’s budget, recounted that before the scheme was abandoned, its onsite security manager was killed, another manager resigned because of death threats, and a senior engineer quit after his daughter was kidnapped. Another 23 workers employed by a subcontractor and a concrete supplier were killed.
Adding to the sober assessments, Hazem al-Attiyah, a senior official at State Oil Marketing Organization (Somo), last week became the latest in a line of oil sector officials, workers and security personnel to be assassinated or kidnapped since the fall of Saddam’s regime. Al-Attiyah, recently appointed as head of crude oil exports to Asia, was kidnapped near his home in West Baghdad early last week.
Past killings have included the head of the fuel distribution company, Hussein al-Fattal, and the deputy to the ministry’s inspector general, Zuhair Hadi. Kidnappings run into the hundreds, but have included Muthanna al-Badri, head of the State Co. for Oil Projects, and Adel Qazaz, head of the North Oil Co.
In the meantime, US troop levels last week hit 150,000, their highest since January when they were beefed up for elections, and the length of their deployment has become a heated topic.
Iraqi President Jalal Talabani said last week that Iraqi forces will be ready to take over from US forces in two to three years, but many remain skeptical. The Iraqi interior ministry said last week that at least 119 Iraqi police were killed in shootings, abductions and bomb attacks in October alone. It added that a further 185 police were reported injured.
By Ruba Husari, Dubai
(Published in International Oil Daily Nov. 6, 2006)