Iraqi Oil: What is hidden inside the Oil Contracts from the 1st and 2nd Bid Rounds ?  

Posted by Big Gav in , ,

ZNet has a look at the Iraq oil law - Iraqi Oil: What is hidden inside the Oil Contracts from the 1st and 2nd Bid Rounds ? (via Energy Bulletin). I found the point that the international oil companies will get additional payments for *not* producing oil kind of interesting, given their long history of suppressing Iraqi oil production.

Over eleven months have passed since the signing of the oil contracts between the Federal Ministry of Oil in Baghdad and the International oil companies (IOCs) resulting from the first and second bid rounds. However, to this date none of these contracts have been publicly released or published in any foreign language. Amazingly, all the contracts are written in English and none of them have even been translated into Arabic by the oil ministry in Baghdad, for the Iraqi people or even their representatives in the Federal parliament in Baghdad to look at and to see how their future is going to be shaped.

I have now obtained access to some of the contracts. My sources have specified that I cannot publish them in full, but I can discuss several aspects of them, which I shall do here.

My analyses will not cover the consequences of these contracts for the future of the Iraqi oil and gas industries or the future relations between Iraq and OPEC and its effect on international oil prices, as I already have covered these important topics in my previous articles [Iraqi Oil: The influence of the 1st Bid Round on the Future of Iraq's National Oil and Gas industries and [Iraqi Oil: Are the 1st and 2nd Bid Rounds Part of A Wise Resource Development Strategy Or Could They Turn Out To Be Steps in the Wilderness? ]

... Conclusions

1. Articles 12 and 37 explain the reasons for the secrecy surrounding the 1st and 2nd bid round oil contracts and the lack of real transparency by the Federal Ministry in Baghdad. Not only have the contracts not been made public, but they have not even been translated into Arabic, which should make every Iraqi suspicious of the motives behind all the secrecy covering the contracts to this date.

2. Article 12 shows that the margin of profits which were agreed on officially with the IOCs' contractors does not represent the only profit that the IOCs will receive from the Iraqi Ministry of Oil, as the Ministry of Oil will compensate the contractors for the quantity of oil that they do not produce, which will in itself represent a penalty on the Iraqi people, whilst the IOC will receive additional profits for doing nothing.

3. Article 37 is a very significant article in terms of setting up the economic future of the Iraqi people and their future sovereignty. Therefore it is not wise to leave these vital decisions in the hands of bureaucrats in the Ministry of Oil or, for that matter, in the hands of a very weak government, without allowing the Iraqi people to have their say on their future by ensuring that such laws can only turn into lawful contracts if they are at least passed by an elected parliament, as required by existing Law number 97 dated 1967 which is still in force, or by a public referendum.

4. There are some analysts who believe that the US oil companies lost out from the awarded contracts, since only two of them, Exxon Mobil and Occidental have been awarded contracts. In my judgment this was not the case, as today what we call the International Oil Companies are really no longer national oil companies operating in the international market, as was the case up to the 1970s. In today's market, what we call IOCs are in fact multinational oil companies (MOC), owned by the multinational financial institutions (mostly US), with share holders from around the globe, and not by one nation's share holders. It is more likely today that the external size of operations and profits of theses companies comes from projects from all over the globe rather than from one nation, as shown by the cases of BP, Shell and most others including CNPC.

5. The contracts awarded in the 1st and 2nd bid rounds confirm that the US occupation of Iraq which started in 2003 did achieve some of its targets. In particular the occupation succeeded in ensuring that the future control of Iraqi oil stayed in the hands of the multinational oil companies and not in the hands of the Iraqi people and their legislative body.

2 comments

Anonymous   says 7:35 PM

You are missing the point. America or any other consuming nation does not need to or probably even want to control Iraqs oil.

America benefits from ensuring Iraqs oil goes into the global market place. This increases the supply side and prevents increasing demand from China and other developing nations pushing the price up.

More supply equals a lower import price for American consumers. If you sell them the 10 million bopd they import at $75/barrel for the next 10 years instead of $150/barrel its a lot of money saved.

Who cares who owns it...

Actually I think you are missing the point - Iraq's oil is worth around US$42 trillion - that's a lot of economic benefit that is going to accrue to someone - and western oil companies have always wanted it to be them (this has been going on for more than a century now).

By and large they couldn't care less what global consumers pay at the pump, as long as the economy isn't completely strangled...

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