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Iraq Signs Oil Deals - Just Not With the USA

| 5 Comments

Reuters: "No boon for U.S. firms in Iraq oil deal auction."

"United States oil majors were largely absent from an Iraqi auction of oil deals snapped up instead by Russian, Chinese and other firms.... The Oil Ministry on Saturday ended its second bidding round after awarding seven of the oilfields offered for development, adding to deals from a first auction in June that could together take Iraq up to a capacity to pump 12 million barrels per day....

So, who won?

"Russia's Lukoil on Saturday clinched a deal to develop Iraq's supergiant West Qurna Phase Two oilfield after having failed to convince Iraq to bypass the auction and revive an old Saddam Hussein-era deal for the field.... No U.S. firms bid for fields offered in the second round, and of the four fields bid on by U.S. firms in the first round, only Exxon Mobil won a major prize, leading a group to clinch a deal for the supergiant West Qurna Phase One field. U.S.-based Occidental came away with a quarter stake in a consortium that won a contract for the giant Zubair field. By contrast, Chinese state oil firms were involved in every first round bid and made a strong showing in the second."

Why were American firms absent? Well, the combination of Iraqi terms and local risks meant that there were profitability questions, something state-owned firms whose mandate is to secure control of resources don't face.

And personally, I'm OK with that.

Iraq's government should try to get the best deal (it should also distribute a chunk of the profits to everyone, a la Alaska, or it's likely to become another weak rentier state). Corporations should evaluate risk and try to make money. If state-owned firms want to pay extra at the auction, it's essentially a form of development aid. Which also draws their interests into Iraq, and its continuing stability.

I'd have been fine if American firms had won, but I'm also fine when they lose here. The net effect and trend is an Iraq that's broadly hostile to al-Qaeda; not a disruptive factor in the region whose threat impedes important regional changes; understands Islamic terrorism in a very broad, painful and personal way; and has the basic resources, infrastructure, and array of foreign stakeholders to make a go of things on its own.

That's pretty good, to me. Can they keep it? That's another set of policy questions, which focus on the next elected government's approach. But unlike the Afghans, they at least have the ability to try on their own.

5 Comments

Actually, I'm happy we didn't win - it send the signal I asked for back before the war - "we're not here for the oil."

Marc

I was under the impression Bush built a secret pipeline to his pool in Crawford?

Also, how's progress going on that magical gas line in Afghanistan we went to war for?

Mark B,

The pipeline to Crawfod was indeed built, but when The One ascended to his semi-divine status as The Great POTUS (pronunciation varies, I prefer the Yiddish analogue), he waved his magic hands and the pipeline disappeared.

I'm told that's the accomplishment that earned him the Nobel Peace Prize; it seems as reasonable a theory as any.

As for the magical pipeline in Afghanistan, I'm told The One is working on it. Apparently, however, the spell calls for an adult Hollywood virgin. I'm told we may have a long wait on this one....

Jim Jubak has a good read about the terms Iraq was demanding, and why nationalized oil companies had an edge over private ones.

I think the bid for the oil auction will go high this year.

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