Iraq Oil

Iraq’s proven oil reserves of 112 billion barrels are the world’s second largest, behind Saudi Arabia.

Lack of investment and restrictions on imports of machinery and technology have taken their toll on the oil industry – which was also battered during the Gulf War.

The country has only been allowed to export a limited amount of oil under the UN’s oil-for-food programme.

Country Iraq
RemainingOil Reserves 112 billion barrels
Amount of oil drained to date 28 billion barrels
Peak year of oil production 2017
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March 11, 2003
The Gangs of DC - Bush Bruisers Cast Eyes on the Pearls of the Orient
By CHRIS FLOYD
Chris Floyd is a columnist for the Moscow Times

The ultimate goal is not Iraq--that bombed, blockaded state partially controlled by a witless thug whom the gang once succored--but domination of the world’s oil supplies in the coming century, when the surging nations of China and India will reach their economic peak. These vast entities could eventually tilt the imbalance of world wealth away from the Anglo-American elites who have for so long held the high and palmy ground of privilege. But the voracious economies of the Asian behemoths will require unstinting draughts of the oil reserves now locked under the sands of Iraq and Saudi Arabia. There is oil elsewhere, yes--but nowhere else in the world are there reserves deep enough to satisfy the thirsts of China and India as they come into their own.

By Fred Pearce
New Scientist
29/01/2003

Iraq has the second largest proven reserves of oil in the world, behind only Saudi Arabia. 112 billion barrels lie below the country’s desert sands, together with another probable 220 billion barrels of unproven reserves. What’s more, the US Department of Energy says, “Iraq’s true resource potential may be far greater, as the country is relatively unexplored due to years of war and sanctions.”

This, plus the fact that “Iraq’s oil production costs are among the lowest in the world, makes it a highly attractive oil prospect,” says the department’s latest country analysis. No wonder many critics believe that the campaign to topple Saddam Hussein is really a battle for Iraq’s oil.

September 5, 2002
The Guardian
The real goal is the seizure of Saudi oil
Iraq is no threat. Bush wants war to keep US control of the region
Mo Mowlam
(- Mo Mowlam was a member of Tony Blair’s cabinet from 1997-2001)
www.guardian.co.uk/Iraq/Story/0,2763,786332,00.html

What is most chilling is that the hawks in the Bush administration must know the risks involved. They must be aware of the anti-American feeling throughout the Middle East. They must be aware of the fear in Egypt and Saudi Arabia that a war against Iraq could unleash revolutions, disposing of pro-western governments, and replacing them with populist anti-American Islamist fundamentalist regimes. We should all remember the Islamist revolution in Iran. The Shah was backed by the Americans, but he couldn’t stand against the will of the people. And it is because I am sure that they fully understand the consequences of their actions, that I am most afraid. I am drawn to the conclusion that they must want to create such mayhem.

Why is he so determined to take the risk? The key country in the Middle East, as far as the Americans are concerned, is Saudi Arabia: the country with the largest oil reserves in the world, the country that has been prepared to calm the oil markets, producing more when prices are too high and less when there is a glut. The Saudi royal family has been rewarded with best friend status by the west for its cooperation. There has been little concern that the government is undemocratic and breaches human rights, nor that it is in the grip of an extreme form of Islam. With American support it has been believed that the regime can be protected and will do what is necessary to secure a supply of oil to the west at reasonably stable prices.

Since September 11, however, it has become increasingly apparent to the US administration that the Saudi regime is vulnerable. Both on the streets and in the leading families, including the royal family, there are increasingly anti-western voices. Osama bin Laden is just one prominent example. The love affair with America is ending. Reports of the removal of billions of dollars of Saudi investment from the United States may be difficult to quantify, but they are true. The possibility of the world’s largest oil reserves falling into the hands of an anti-American, militant Islamist government is becoming ever more likely - and this is unacceptable.

The Americans know they cannot stop such a revolution. They must therefore hope that they can control the Saudi oil fields, if not the government. And what better way to do that than to have a large military force in the field at the time of such disruption. In the name of saving the west, these vital assets could be seized and controlled. No longer would the US have to depend on a corrupt and unpopular royal family to keep it supplied with cheap oil. If there is chaos in the region, the US armed forces could be seen as a global saviour. Under cover of the war on terrorism, the war to secure oil supplies could be waged.

This whole affair has nothing to do with a threat from Iraq - there isn’t one. It has nothing to do with the war against terrorism or with morality. Saddam Hussein is obviously an evil man, but when we were selling arms to him to keep the Iranians in check he was the same evil man he is today. He was a pawn then and is a pawn now. In the same way he served western interests then, he is now the distraction for the sleight of hand to protect the west’s supply of oil.

Exploring new oil fields in Iraq: a risky business
The Christian Science Monitor

By David R. Francis
It boasts the world’s third largest proven oil reserves, a vast unexplored territory of potential oil, and a serious need for cash to rebuild itself. That’s why Iraq has taken the first step to open its reserves to the world. In a momentous and highly sensitive move, the interim Council of Ministers is inviting foreign oil companies to develop potential fields.

If it works, the plan could double Iraq’s oil revenues, ease somewhat world jitters about an oil crunch, and possibly fulfill what some see as a key goal of the Bush administration - ensuring another reliable oil-rich partner in the Middle East beyond Saudi Arabia.

But the plan carries risks for Iraqi moderates, the business interests of the United States and Britain, and the international oil companies themselves.

Under the new strategy, two national oil companies - one for oil, the other for gas - would run the existing oil fields, says Hilal Aboud al-Bayati, economic adviser to interim Prime Minister Iyad Allawi. The outside companies would develop potential oil fields - a large, multiyear undertaking that could produce some dramatic new reserves, since roughly 90 percent of Iraq remains unexplored.

The government wants to “make things easy” for foreign investment, says Dr. Bayati in a telephone interview. “Iraq has taken steps toward a market economy where the private sector and foreign investors will play a big role in the economy.”

His hope is to nearly double the country’s production from between 1.6 million to 1.8 million barrels per day to 3 million b.p.d. by 2007. That would be the highest level of production since Iraq invaded Kuwait in 1990. By most estimates, Iraq doesn’t have the excess cash to develop those potential fields itself.

But foreign oil companies face big physical, economic, and political risks. A “monster if” - as in if it’s safe, says Ronald Gold, an economist with the Petroleum Industry Research Foundation in New York.

The insurgency has already taken its toll: some 182 attacks on Iraq’s energy infrastructure since June 2003, according to the Institute for the Analysis of Global Security, a nonprofit energy-security group. That sabotage has slowed output by some 400,000 to 600,000 b.p.d., Bayati estimates. It has also made oil companies wary of moving in. “Security problems are the main obstacle” to attracting foreign investment, he adds.

The political risks are equally serious. The Jan. 30 elections will not change the oil plans drafted by the interim government, Bayati says. But at some point, a new law spelling out the rights of investors in oil must be passed by the as yet unformed legislature. Will nationalist Iraqi politicians - let alone religious hard-liners - let foreign companies develop the nation’s oil fields?

“A free Iraqi people will not give their oil away,” warns A. F. Alhajji, an economist at Ohio Northern University in Ada. “Negotiations [with foreign oil companies] are going to be very tough.” He predicts that the nation’s oil reserves will have to remain under government ownership, even if foreign oil companies are allowed to be partners in their exploitation.

The previous Iraqi constitution prohibited foreign ownership of the nation’s oil. Further, Shiite Muslim clerics issued religious decrees decades ago that still stand, supporting the nationalization of the oil industry.

Even if the majority of Iraqi legislators go along with the plan, they will have to sort out key issues. How decentralized should the economy be? Will regional governments control the oil and its revenues or will the national government?

Oil is the “lifeblood of the country,” says Raad Alkadiri, a director of PFC Energy, an energy consulting firm in Washington. “It’s the principal export and principal source of government revenue. It gives you political weight.”

The US and Britain have hoped that their efforts to oust Hussein might give their oil companies an advantage in seeking postwar Iraqi oil deals. But a new Iraqi government may be reluctant to give such powerful nations added economic leverage over the country, says Mr. Alkadiri. Instead, it might let contracts go to the highest bidder, whatever its nationality. Or oil companies may form multinational consortiums to bid in Iraq.

Last month, Iraq awarded its first post-Hussein oil contract for $136 million to a Turkish-British-Iraqi consortium to develop an extension of the Kirkuk oil field.

The business risks of searching for oil in a volatile area also loom large. “Oil companies will want to see some of these constitutional issues better clarified before they make major investments,” Alkadiri says. He doubts any major foreign oil investment is likely before the end of 2005 or 2006.

Still, the new Iraqi oil strategy makes economic sense, oil experts say. Its potential reserves are huge.Estimates range from some 45 billion barrels to as high as 100 billion barrels, a top-end estimate that would nearly double Iraq’s proven reserves.

Oil exploration, of course, involves geophysical risk. It could take hundreds of millions of dollars to find there is no oil. If adequate oil reserves are found, it would take more money to build the infrastructure to get it to the world markets. The total could run to $2 billion to $3 billion, estimates Mr. Simmons.

That’s money Iraq doesn’t have. The revenue it earns from its current oil fields are needed both for reconstruction and other government expenses, as well as fixing up these fields, experts say.

So foreign investment will be required - and the search for oil will be quite feasible, technically speaking.

“Iraq is one of the relatively less difficult areas of the world,” says Mr. Gold. The oil is under dry land, not a thousand feet of water. It is located in the Middle East, where it could be exported with fairly short pipelines and existing ports.

When new Iraq oil comes into the world oil market, its impact on oil prices will depend on the demand- supply situation at the time, oil experts say. It could also hang on the willingness of OPEC members, especially Saudi Arabia, to make room for Iraqi oil by trimming its own output - if that is needed.