Friday, June 19, 2009

Iraqi Oil Minister accused of mother of all sell-outs

To public fury, the country is handing over control of its fields to foreign companies

By Patrick Cockburn in Baghdad

An employee works at Tawke oil fields in the Kurdish region in northern Iraq on SundayFurious protests threaten to undermine the Iraqi government's controversial plan to give international oil companies a stake in its giant oilfields in a desperate effort to raise declining oil production and revenues.

In less than two weeks, on 29 and 30 June, the Iraqi Oil Minister, Hussain Shahristani, will award service contracts to the world's largest oil companies to develop six of Iraq's largest oil-producing fields over 20 to 25 years.

Senior figures within the Iraqi oil industry have denounced the deal. Fayad al-Nema, the director of the South Oil Company, which comes under the Oil Ministry and produces most of Iraq's crude, said on the weekend: "The service contracts will put the Iraqi economy in chains and shackle its independence for the next 20 years. They squander Iraq's revenues." Mr Nema is reported to have since been fired because of his opposition to the contracts, which he says is shared by many other officials in Iraq's state-owned oil industry. 

The government maintains that it is not compromising the ownership of Iraq's oil reserves – the third largest in the world at 115 billion barrels – on which the country is wholly dependent to fund its recovery from 30 years of war, sanctions and occupation.

But the fall in the oil price over the past year has left the government facing a financial crisis; 80 per cent of its revenues go to pay for salaries, food rations and recurrent costs. Little is left for reconstruction and the government is finding it hard to pay even for much-needed items such as an electrical plant from GE and Siemens.

The development of Iraq's oil reserves is of great importance to the world's energy supply in the 21st century. They may be even larger than Saudi Arabia's, as there was little exploration while Iraq was ruled by Saddam Hussein. International oil companies are desperate to get their foot in the door.

"Everyone wants to be in Iraq," says Ruba Husari, an expert on Iraqi oil. "Together with Iran, this is the only oil province in the world that has great potential. It is a great opportunity for oil companies because nobody knows the size of Iraq's reserves. Iraq itself needs to know what is under its soil."

But Iraqis are wary of the involvement of foreign oil companies in raising production in super giant fields like Kirkuk and Bai Hassan in the north and Rumaila, Zubair and West Qurna in the south. They suspect the 2003 US invasion was ultimately aimed at securing Western control of their oil wealth. The nationalisation of the Iraqi oil industry by Saddam Hussein in 1972 remains popular and the rebellion against the service contracts has been gathering pace all this week.

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