Oil majors may rob Iraq of billions
* Oil ministry officials under US, UK pressure
LONDON: World supermajors may rob Iraq of billions and grab control of its oilfields unless ordinary Iraqis can have a greater say in how their country’s riches are tapped, US and British campaigners said on Tuesday.
Big oil is being lured by the Production Sharing Agreement (PSA), promoted by Washington and London, which gives them huge returns on investment, but deprives Iraq of up to $194 billion, according to “Crude Designs: The rip-off of Iraq’s oil wealth”.
“Under the influence of the US and UK, powerful politicians and technocrats in the Iraqi oil ministry are pushing to hand all Iraq’s undeveloped fields to multinational oil companies, to be developed under production sharing agreements,” said Greg Muttitt, the report’s author. Muttitt is an analyst at PLATFORM, a London-based charity focused on oil’s social and environmental impact.
Production sharing agreements are already common currency in countries like Russia, Nigeria and the United Arab Emirates. They often run for decades, generally allow oil firms to recoup all of their costs and keep a chunk of profits.
Critics point out that ballooning costs can sometimes leave the producer country waiting in vain for the first profits from oilfields. Russia is furious with Royal Dutch/Shell over overshooting spending at its huge Sakhalin project, and Nigeria is trying to toughen the terms of its production deals.
Tuesday’s report, backed by charities and think-tanks including War on Want, the Global Policy Forum and Institute for Policy Studies, said a US and British push for “energy security” was the main driver behind this approach in Iraq.
“The key US-UK energy security priority is secure control over an increasing supply of Gulf oil, preferably delivered by investment from their own oil companies,” it said. Some ordinary Iraqis shared that suspicion. “We want our government to control the foreign oil companies not the other way round,” said Waseem, 23, a Baghdad decorator.
According to the report, the loss from production sharing agreements would amount to $2,800 to $7,400 per Iraqi adult over the 30-year lifespan of a typical deal. By comparison, Iraqi gross domestic product is now only $2,100 per person. The report recommended Baghdad use direct investment from the government budget, borrow from banks or multilateral agencies or secure foreign investment using more flexible and equitable contracts.
Route to investment: But many argue PSAs, the most sought-after contract in the oil industry, will ensure swift development of Iraq’s reserves, the world’s third biggest after Saudi Arabia and Iran, speed up reconstruction and hasten the return of cash to the country.
They say contracts of this nature are the only way to attract foreign expertise in view of the country’s instability. “In order to make major quantum increases in oil, we need to have production-sharing agreements,” Iraqi Deputy Prime Minister Ahmad Chalabi said recently. Predictably, the report drew fire from Iraqi oil officials.
“This is taken out of context,” Shamkhi Faraj, Director General of Economics and Oil Marketing, told Reuters. “We are not even close to that stage (of negotiations) and when we get there, everything will be done through open tenders and discussions. Anyone who wants to take part will be able to.”
Iraq’s most valued oilfields will require some $20 billion to expand their capacity towards a six million barrels per day (bpd) target. reuters