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Date Posted: 02:50:19 03/26/03 Wed
Author: Weird_Enigma
Author Host/IP: 209.252.119.10
Subject: Postwar Iraq expected to become a petro power
In reply to: Weird_Enigma: my own thoughts 's message, "Disarming Iraq was nothing but a ruse" on 20:15:11 03/20/03 Thu

By Peter Behr
Washington Post Staff Writer
Sunday, March 23, 2003; Page A08


In gaining swift control of Iraq's southern oil fields and terminals, U.S.-led forces have put the country on a course to becoming again one of the world's petro powers, experts agree.

After 20 years in decline following wars with Iraq and the United States, Iraq's oil industry could emerge within several years as a potential rival to Saudi Arabia's oil dominance, the experts say, as well as a fulcrum of future energy politics for the United States, Europe and Asia.

The fate of Iraq's northern oil fields at Kirkuk was not clear yesterday. But the seizure of the massive Rumaila field near Kuwait and allied control of other potential super-reservoirs just to the north, at Majnoon and West Qurnah, is enough to place Iraq back in the company of leading energy producers if the removal of Saddam Hussein's regime is completed and a stable government can be formed.

"When these huge fields are developed, there will be a secure new supply of oil for the world. This is the true reward" for ousting Hussein, said Muhammad-Ali Zainy, an Iraqi oil official who fled the country in 1982, in an interview in December. Zainy recently left a London consulting firm to return to the Persian Gulf in hopes of a role in a new Iraq oil ministry, a colleague said.

An agenda of critical postwar issues, until now hypothetical subjects of planning and debate in government offices, corporate boardrooms and policy think tanks, is suddenly immediate and real.

Who would run Iraq's oil program, assuming victorious U.S. forces turn Iraq's oil reserves over to a new government in Baghdad, as the Bush administration has pledged? Would a new Iraqi oil ministry favor the companies of the United States and Britain over those of Russia and France, who had won billions of dollars in development contracts from Hussein's deputies?

Would a postwar Iraq, an original member of the Organization of Petroleum Exporting Countries that has been on OPEC's sidelines since its defeat in the 1991 Gulf War, support Saudi goals of keeping world oil prices within a stable range, about $25 a barrel? Or would Iraq rush to refill its treasury by boosting production, and driving down oil prices, at the expense of the Saudis, Iran, Kuwait and other producers? In that scenario, could OPEC survive?

The president's critics, here and abroad, have contended that the campaign against Hussein was aimed in large part at putting Iraq's oil reserves into friendly hands.

"If the U.S. invades and controls Iraq, clearly the U.S. oil companies will head the first bid in terms of production, distribution and, of course, profits," said consumer activist Ralph Nader in an interview on National Public Radio last month.

Secretary of State Colin L. Powell and other administration officials called such charges a canard. "The oil of Iraq belongs to the people of Iraq. And we will help the people of Iraq use that oil for their benefit and not to threaten their neighbors," Powell said.

U.S. energy industry executives agree with Powell. "I don't think you'll see the U.S. government move in and try to exert direct control -- or even direct influence," said Barry Worthington, executive director of the U.S. Energy Association, an group of energy firms and government agencies. "That would be too bold and too apparent an outcome that would cast suspicions on motivations."

"The optimal result is to get them [Iraq] going, to let them take over the responsibility as soon as possible," said Red Cavaney, chief executive of the American Petroleum Institute.

Iraq's rich resources are coveted by the world's oil companies. Yet, even if the Kirkuk fields escape damage, Iraq's oil facilities will need as much as $5 billion in investment and several years of reconstruction to repair two decades of war damage and neglect, experts said.

Last year, Iraq said it had signed new deals with oil companies in France, China and Russia to develop new fields, a commitment of over $30 billion, according to Deutsche Bank. All those companies will be back in the hunt, joined by U.S. and British energy firms.

The country's proven reserves, estimated at 110 billion barrels, are triple those of the United States, and are exceeded only by Saudi Arabia's. Another 100 billion to 300 billion barrels may be found in Iraq, and the low extraction costs make Iraqi oil particularly desirable, experts said.

But under Hussein nearly all of its oil exports have been under the control of the United Nation's oil-for-food sanctions, and foreign investment was strictly limited. Iraq's production, as high as 3.5 million barrels a day in 1990 , has been about 2.5 million barrels a day at best. The United States produced about 6 million barrels a day of crude oil and imported 9 million barrels daily last year, with about 442,000 barrels a day from Iraq.

In several years, Iraq's production could be back to about 3 million barrels a day, analysts said, and by the end of the decade, it could potentially hit 6 million. "The world hasn't needed any new OPEC oil for a decade," said a senior executive for a major oil company that is keenly interested in Iraq's oil future. Iraq's appeal to oil producers depends on the kind of deals it offers, said the official, who requested anonymity.

Iraq's goal is likely to be a stable flow of oil, probably less than 3 million barrels daily, to avoid flooding the market and depressing prices, said Walid Khadduri, editor in chief of the Middle East Economic Survey in Nicosia, Cyprus. "It's not to Iraq's advantage to destabilize the market and cause a crash" in prices, he said.

Iraq might feel forced to accelerate production, to deal with more than $150 billion in debt, most of it war obligations owed to Kuwait and other gulf states. "Kuwait's reparations now come directly out of oil sales. There's no sign that Kuwait wants to back down from that," said Simon Wardell, research manager at World Markets Research Centre in London.

How a future Baghdad government works out its relationships with its Persian Gulf neighbors is the first of the questions that will redefine the international oil market in the coming decade, he said.

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Replies:

  • Big Contracts for Postwar-Iraq Reconstruction -- All to U.S. Firms -- Weird_Enigma, 02:52:46 03/26/03 Wed
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