Mission Not Yet Accomplished for U.S. and UK Oil Majors in Iraq

U.S. and British oil majors such as Exxon Mobil, Chevron, BP and Shell can’t wait to unfurl their own “mission accomplished” banner in Iraq, signaling that they have been given access to the country’s massive oil reserves that have been largely neglected in the past five war-torn years. Recent signs suggested they were well on their way. One New York Times article on June 19 reported they were “in the final stage of negotiations,” while another this morning revealed that U.S. government advisers in Iraq have been involved in designing those deals.

Today was supposed to be the day that Iraq would finally begin making good on the principal that “to the victors go the spoils.” Instead, the U.S. and UK companies, like children trying to raid the cookie jar just before dinner, had their hands slapped by Iraqi Oil Minister Hussein al-Shahristani. Award of the initial contracts, designed to cover technical services, was put off, the minister said, because the companies “refused to offer consultancy based on fees as they wanted a share of the oil.”

Instead, Shahristani released a list of 35 companies from around the world that have been prequalifed to bid on the bigger prize—contracts involving long-term drilling rights in six of the country’s major oil fields. Exxon Mobil and the other majors had to suffer the indignity of being put on a par not only with smaller U.S. producers (such as Anadarko and Occidental) but also companies from countries such as Japan (Nippon Oil), Italy (Eni), Russia (Lukoil and Gazprom Neft), China (CNOOC and Sinochem), Spain (Repsol YPF), Norway (Statoil Hydro), India (ONGC), Malaysia (Petronas Gas) and Indonesia (Pertamina). Also on the list was France’s Total S.A., which had already been mentioned along with the U.S. and UK majors as a contender for the technical services contracts.

Iraq excluded oil companies such as France’s Perenco and U.S.-based Calibre Energy that had signed disputed agreements with officials in Iraq’s Kurdish region. Yet it is interesting that Shahristani’s prequalified list includes two companies that were accused of being involved with kickbacks paid to the government of Saddam Hussein in connection with the United Nations oil-for-food program during the 1990s: China’s Sinochem and Russia’s Lukoil, each of which were prominently featured in the final report of an independent investigation led by Paul Volcker.

Is it possible that Iraq is more inclined to reward companies that allegedly collaborated with the Saddam Hussein regime than major oil producers from the countries that “liberated” his nation from that regime but continue to occupy it five years later?

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