Iraqi Oil Contracts – It’s the Perception That Matters

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Have you ever wondered why…

… it has been the practice of the major media to avoid mentioning oil in connection with military activity in Iraq; something also common in the Congress, all following the lead of the Bush administration.

UPI.com

Shouldn’t we all be shocked then? Shouldn’t we be shocked to learn, after the US – British led invasion of Iraq to save the world from the dangers of Saddam’s non-existant WMDs, struck Iraq with a shock and awe which was to have become the centerpiece for a GWOT, that as Reuters reported on Tuesday:

Iraq opened its giant oilfields to foreign firms on Monday, putting British and U.S. companies in pole position five years after U.S.-led troops invaded the country to oust Saddam Hussein.

On June 30th it was revealed that a group of American advisers, led by a small State Department team, have been playing an integral part in drawing up technical service contracts between the Iraqi government and five major Western oil companies, two American, two British and one French – Exxon, Total, Shell, Chevron and BP, to develop some of the largest oil fields in Iraq.

The advisers – who, along with the diplomatic official, spoke on condition of anonymity – say that their involvement was only to help an understaffed Iraqi ministry with technical and legal details of the contracts and that they in no way helped choose which companies got the deals.

NYT

Technical service contracts are used by the other petroleum-rich countries in the Persian Gulf Region. In return for providing services such as consultation, training, and providing equipment for oil field development for an agreed upon period of time, they are paid a set fee for their services.

Readers might recall that the hydrocarbon law which had been set as a “benchmark” for determining progress in Iraq permitted, unlike other countries in the region, production sharing agreements which would allow foreign oil companies ownership of Iraq’s oil through PSAs (production sharing agreements) in return for their services. Such an oil law has not been approved by the Iraqi Parliament. However, Iraq is already splitting revenue by compromise between factions.

… the oil law has been stalled in Parliament by internal Iraqi disputes over the extent foreign oil companies should be allowed into the national oil sector and how much control over the oil strategy will be given to local governments. Three companion laws — revenue sharing, reconstituting the national oil company and reorganizing the Oil Ministry — are further behind in the legislative process.

UPI.com

It needs to be pointed out that the no-bid contracts that have been the object of most of the recent criticisms are relatively short-term, interim consulting contracts. However they provide a foot-in-the-door and these same companies will be on track for the next round of oil field development contracts. These are for work in oil fields which have been referred by the Iraq Oil Ministry as being the backbone of Iraq’s oil production.

These contracts, the next round, are estimated to be worth approximately $500 million each and would provide technology, training and equipment for six key oil fields in Iraq. The bidders, those noted above, were chosen out of a field of 120 companies. The bids are due to be reviewed in April of next year and contracts awarded based on how much the companies propose increasing production, how many jobs it will create for Iraqis and how much training the companies can provide for local staff.

Now, however, there has been a slight hitch in the negotiations for the smaller scale, interim technical services consulting contracts. The oil companies would prefer to have a share of Iraq’s oil rather than to receive payment in dollars. And with a falling dollar and rising oil prices, who wouldn’t.

Iraq said on Monday (29 June) that it had failed to sign technical support deals with global oil majors hoping to cash in on boosting the war-torn country’s extensive but under-exploited oilfields.

Iraq is still negotiating with Shell, BP, ExxonMobil, Chevron and Total, and a consortium of other smaller oil companies, to develop six oil blocks and two gas fields, Oil Minister Hussein al-Shahristani told a press briefing.

“We did not finalize any agreement with them because they refused to offer consultancy based on fees as they wanted a share of the oil,” he said.

“The TSAs (technical support agreements) are only simple consultancy contracts to help us raise the production during the interim period” before the ministry enters into long-term contracts to develop the oil and gas fields.

The widely expected arrangement was to pave the way for global energy giants to return to Iraq 36 years after Saddam Hussein threw them out, and was seen as a first step to access the earth’s third largest proven crude reserves.

AFP

Some US lawmakers are worried. They’re worried about perceptions.

Senators Schumer, Kerry and McCaskill in a short press conference Tuesday … warned against possible perceptions that the war was fought to benefit international oil companies …

UPI.com

Are they worried the truth might be revealed? Do they actually believe that the people of the Middle East or elsewhere have been fooled and really believe Iraq was invaded for altruistic reasons or for revenge against the 9/11 attack?

The semi-independent Kurdistan Region has already signed contracts with a number of oil companies including Hunt Oil Corp. which has connections with the Bush Administration. The Kurdistan contracts include production sharing agreements which allow for foreign oil companies’ ownership of Iraqi oil.

The Iraqi Oil Ministry has stated that the oil deals entered into by the Kurds are illegal and that the oil companies who have entered into them might well be barred from from participating in future contracting through the Ministry.

“We pretend it is not a centerpiece of our motivation, yet we keep confirming that it is,” Frederick D. Barton, senior adviser at the Center for Strategic and International Studies in Washington, said in a telephone interview. “And we undermine our own veracity by citing issues like sovereignty, when we have our hands right in the middle of it.” As quoted in NYT – 30 June 2008.

We’ve spent nearly a half a trillion dollars invading and occupying Iraq. Who can count the loss of lives and the toll in blood, in misery and destruction. But, as always when it comes to war, the well-connected stand to profit handsomely.  

25 comments

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  1. having ordered U.S. forces to begin the invasion of Iraq, the president said in an evening address: “We have no ambition in Iraq, except to remove a threat and restore control of that country to its own people.”

    McClatchy reported on Wednesday 2 June 2008 that differences over proposed status of forces agreement (SOFA) between Iraq and the US have been narrowed. Once a SOFA has been approved the chances of the US military leaving Iraq anytime in the near future are very slim.

    Have you ever wondered why?

  2. Henry Waxman is pursuing the Hunt angle:

    House oversight committee Chairman Henry Waxman says the Bush Administration knew about the September 2007 deal that Texas-based Hunt Oil struck with Kurdish officials in Iraq.

    That contradicts what President Bush said at the time.

    http://tpmmuckraker.talkingpoi

    And posts a timeline that directly refutes Chimpy’s claim he didn’t know about the Hunt/Kurdistan deal:

    http://tpmmuckraker.talkingpoi

    Thought this might interest you.

  3. A LOT more money to steal oil than it does to buy it.

    It has also cost 4025 more than money.

    • srkp23 on July 3, 2008 at 4:26 pm

    Unfortunately, given high gas prices and media manipulation, people might actually just say, “Hey, well, we do need oil, and  we couldn’t let that madman Hussein hold the world’s oil hostage, now, could we?” I’m only half kidding.  

  4. Danish island gets it right.  Elizabeth Kolbert delivers the news:

    For the past decade or so, Samsø has been the site of an unlikely social movement. When it began, in the late nineteen-nineties, the island’s forty-three hundred inhabitants had what might be described as a conventional attitude toward energy: as long as it continued to arrive, they weren’t much interested in it. Most Samsingers heated their houses with oil, which was brought in on tankers. They used electricity imported from the mainland via cable, much of which was generated by burning coal. As a result, each Samsinger put into the atmosphere, on average, nearly eleven tons of carbon dioxide annually.

    Then, quite deliberately, the residents of the island set about changing this. They formed energy coöperatives and organized seminars on wind power. They removed their furnaces and replaced them with heat pumps. By 2001, fossil-fuel use on Samsø had been cut in half. By 2003, instead of importing electricity, the island was exporting it, and by 2005 it was producing from renewable sources more energy than it was using.

    http://www.newyorker.com/repor

  5. and I just posted it on another thread. I was not aware of this. This is essentially a declaration of war on Iran. It will be interesting to see who votes which way on this.

    This resolution, H.J. Res 362 [listed as H. Con. Res 362 online] is a virtual war resolution. It is the declaration of tremendous sanctions, and boycotts and embargoes on the Iranians. It is very, very severe. Let me just read what is involved if this bill passes and what we’re telling the President what he must do:

       

    This demands that the President impose stringent inspection requirements on all persons, vehicles, ships, planes, trains and cargo entering or departing Iran, and prohibiting the international movement of all Iranian officials.

    This is unbelievable! This is closing down Iran. Where do we have this authority? Where do we get the moral authority? Where do we get the international legality for this? Where do we get the Constitutional authority for this? This is what we did for ten years before we went into Iraq. We starved children-50,000 individuals it was admitted probably died because of the sanctions on the Iraqis. They were incapable at the time of attacking us. And all the propaganda that was given for our need to go into Iraq was not true.

    The entire article is here.

  6. Something must first be said about the SOFA agreement that the US is trying to reach. What we hear of it so far in the MSM is sporadic talk of progress, and most of that is leaked by Iraqi officials.

    What the MSM doesn’t really talk too much about is that any national agreement first has to be ratified by parliament, and that will only happen with Sistani’s approval. Here is what Sistani thinks about it so far.

    You have to whip out your Google translator for this, but it’s a fatwa from Ayatollah Mohammed Hussein Fadlallah out of Lebanon. You might think, “well, so what; another fatwa…”, but you might be wrong because he has a large Dawa following. Maliki is Dawa.

    SOFA either has to get snuck in by dubious means, or it must necessarily be a very short term thing. In any case, it will provide a rallying cry to whip up the masses because allowing an aggressive invader in the Levant is against Sharia law and probably many more tenet’s. It’s not just offensive, it is forbidden. It’s like lobbying for an abortion clinic to be placed inside of St. Patrick’s Cathedral.

    Iraq needs cash, and the oil companies are taking advantage of the chaos and disunity in Iraq to get a foot in the door. It may hold for a little bit, but all the elements are in place (especially the hatred) for the oil companies to find themselves out of whatever assets they put in, and that can happen real fast.

    Iraq is still a terrible mess just below the surface. Elections are going to be postponed and Maliki, for whatever reason, seems to be more content with trying to consolidate gains in the short term, than making the right moves for long term stability. The Sunni Awakening is not only losing cohesion, but it is getting squeezed in all the wrong ways. Nothing appears to be happening in the ways that it should be developing for long-term security.

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