Iraq: The great black gold gamble  

The subject of Iraq's oil was in the local media on the weekend, with the SBS Dateline program and the Sydney Morning Herald featuring reports from Paul McGeough on the recent increase in the country's oil reserves and potential production increases - The great black gold gamble, Iraq to fight for greater share of OPEC rations and Power Struggle.

As unlikely players gather at the world's last energy casino, Iraq still faces an uncertain future despite its potential huge wealth.

THE tension is exquisite. Iraq is a political, security and economic basket case, but it is also the world's last energy bonanza. And because they are desperate for a piece of the hottest hydrocarbon action on Earth, oil executives come to prostrate themselves, offering to pump Iraq's runny black gold for a pittance.

There is another tension, equally exquisite. As Iraqi politicians fumble their efforts to create a government that might harness oil wealth so colossal it could catapult Iraq among the globe's leading economies, they are in a race against time and rising anger in a marginalised and increasingly disenchanted population.

And all this is topped off by a remarkable turn of events. After a trillion-dollar war of liberation which at home and abroad was often cited as a measure of Washington's determination to kick in Baghdad's door for Texas oilmen and their kin, American companies were left in the wash by more determined competitors from across the world in the grand auction of development licences in Baghdad. ''Paltry'' is how The Washington Post reported the performance of the US firms.

The Chinese are in in a big way, so too the Russians and Europeans. Companies from Malaysia and Angola have a stake in five of the winning consortiums. Petronas, state-owned in Kuala Lumpur, is a partner in three; Sonangal, part-state-owned in Luanda, is a partner in two.

Seven US firms registered for the Baghdad auction, but only one - Exxon Mobil - came through as a senior partner in a single project. Of the rest, only Occidental Petroleum won a minority stake in another. By comparison, the state-owned China National Petroleum Corporation is the senior partner in two developments, and two Russian firms - including the Kremlin-owned Gazprom - are in there.

Big American oil houses such as Chevron and ConocoPhillips, which industry observers expected would stay in the mix because of their close ties to the Iraqi Oil Ministry, were left with nothing.

When the BP-Chinese joint venture became the first to test the Baghdad waters - offering a deal under which it would be paid just $US2 a barrel to lift oil, while working to push the ''super giant'' Rumaila oilfield's output to almost 3 million barrels a day - some in the industry saw the bid as a crazy, self-defeating low ball.

But after the BP-CNPC negotiations, two hard realities emerged for the rest of the industry. One, Baghdad was deadly serious about retaining sovereign ownership of its resources and so would hold the international oil companies to being paid a flat per-barrel fee, meaning that all the gain from rising oil prices will flow to Iraq; and two, that the $US2 fee for Rumaila was a first bidder's reward for BP-CNPC and that most who came after them would be screwed just a little bit harder.

"Not too flash," a foreign diplomat in Baghdad observed.

Despite the feigned scepticism of the oil majors when confronted by this hard-nosed stance in Baghdad, the auction in December at which the development licences were sold was seen as the best last chance to be a player in the world's last energy casino. Despite a wave of terrorist bombings that were intended to frighten off the bidders in the run-up to the auction, a senior oil man told the Herald: "Those last days were the tipping point for companies deciding they just had to be in."