Results of Iraqi Oil Rights Auction Show No U.S. Favoritism
The Chairman of China’s national oil company, the CEO of BP, and an Iraqi oil official celebrating a recent deal giving CNPC and BP access to Iraq’s giant Rumaila oil field. (image: wsj.net)
So much for conspiracy theories. A number of people have opined that the U.S.-led invasion of Iraq was a cynical grab for oil, armed robbery on a national scale to secure access to Iraq’s enormous oil reserves. Based on the results of two rounds of auctions for the opportunity to develop Iraq’s oil fields, that was not the case—or the U.S. has been profoundly inept in taking advantage of Iraq.
In the first round, only one U.S. firm, Exxon Mobil, inked a significant deal, to develop the rich West Qurna field in partnership with Royal Dutch Shell. In the recently completed second round of auctions, no U.S. firms won development rights. Instead, as reported by Reuters Sunday, foreign firms, including especially Russian and Chinese oil companies, took pride of place, snatching up the best and potentially most lucrative deals. Iraqi oil officials hailed the results, saying it shows that their government is “fully free from outside influence.” Not content with touting his nation’s independence, an Iraqi spokesman went on the slander the country that’s spending blood and treasure to secure Iraqi security: “No one, even the United States, can steal the oil, whatever people think.”
Of course, the U.S. oil company shutout appears to have been mostly self-made: only one U.S. firm even bothered bidding in the second round. The reason is, despite the richness of Iraq’s oil reserves, Iraqi oil development is not a very attractive proposition:
• The rates, and therefore return on investment, offered by Iraq are low.
• The country still faces significant political and security issues, making investments very risky; as one U.S. oil executive said, “The bids are based on very ambitious assumptions in terms of stability”—assumptions that may not be realistic.
That’s why foreign state-owned companies, such as those from China and Angola, which do not need to show a profit and which are used to operating in riskier and less stable environments, were among the foremost bidders.
The results of the auctions will cheer those who hoped that the U.S. was not invading another nation to steal its oil—and disappoint any Americans hoping we might see lower gasoline and heating oil prices as a result of taking on nation building in Iraq.
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[...] efforts by the Chinese are not new. The country walked away from an early December auction with lucrative deals in place to develop Iraq’s oil fields. And even earlier that month, the China National Petroleum Company made a less-favorable deal to [...]
Iraq Looks for Partners to Develop its Oil Superfields | HeatingOil.com says: says:
[...] south, the Qayara and Najmah oilfields in Nineveh province. The deal is the latest in a series of partnerships Iraq has forged with foreign oil companies to help develop its outdated oil infrastructure. Iraq has the third-largest proven oil reserves in [...]
Iran-Iraq Standoff Ends Peacefully, But Oil Pipeline Explodes in Separate Incident | HeatingOil.com says: says:
[...] turn the country into a major and modern oil producer. Auctions have recently been held offering foreign oil companies the chance to develop Iraq’s abundant oil fields. According to Al-Jazeera, ten oil deals have now been awarded to international consortiums. The [...]
Steven Zweig says: says:
I assume you mean I’m “not too quick on the uptake,” not “to to quick on the uptake”–cutting down on others’ perceptiveness loses some force when you can’t articulate your thought. That aside, it’s also not clear what exactly you’re objecting to.
For the record, many people, abroad and in the States, feel that we went to war in Iraq for oil. I don’t. I do think it was about U.S. self-interest–what the administration at the time believed fostered American security–and I think that the notion we’re doing it for the Iraqi people is largely a gloss put on the occupation after the fact. It seems to have become more of a policy driver now, years into the occuption, but I don’t think we invaded in the first place out of altruism.
But whatever our goals, I don’t think that oil was among them. Or if it was, we’ve displayed a stunning level of incompetence in taking Iraqi oil.
Personally, I think we should be taking some oil in the following sense: a portion of Iraqi oil revenue should be dedicated to the cost of rebuilding their infrastructure and maintaining their security. To whatever extent Iraq benefits from then U.S. presence, it should be the Iraqi people, not be the U.S. taxpayer, paying the freight.
Really? says: says:
“So much for conspiracy theories. A number of people have opined that the U.S.-led invasion of Iraq was a cynical grab for oil, armed robbery on a national scale to secure access to Iraq’s enormous oil reserves” - You’re to to quick on the uptake there, are you?