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http://www.msnbc.com/news/896012.asp?0si=-
Big role urged for oil firms after war
Iraqi delegates recommend profit-sharing deals to boost production Iraqi workers tend to a pipe at the Iraqi-Turkish pipeline in Karkuk, northern Iraq, in a December 2000 file photo.
LONDON, April 5 — Iraqi exiles and senior U.S. officials agreed Saturday that international oil companies should take a leading post-war role in reviving Iraq’s oil industry, delegates to a policy meeting said.
THE TALKS, held under the auspices of the U.S. State Department, also resulted in a recommendation that Baghdad stay in OPEC, though without limits on production, Iraqi delegates said.
Although early work will focus on the rehabilitation of existing facilities, talks with foreign oil majors on long-term projects could start quickly, the said.
“It is in Iraqis’ interest for an interim period of government to be as short as possible,” said Dara Attar, an oil consultant representing some opposition groups.
Foreign investment deals, most likely production-sharing contracts, with a full-fledged Iraqi government could come in between six months and two years time, he said.
“Yes, that is the idea because there is no doubt the oil companies are needed,” said Fadhil al-Chalabi, a former under-secretary at the Iraqi oil ministry who attended the meeting.
The guidance will go to a U.S.-run interim authority and a subsequent transitional government. It is likely to be published in about two weeks time.
The recommendations came from the fourth meeting of the oil and energy working group of the State Department’s Future of Iraq project run by Thomas S. Warrick, special adviser to the U.S. assistant secretary of state for near eastern affairs.
A statement afterward called for Iraqi oil and natural gas to be exploited for the benefit of the Iraqi people.
It added: “The country should establish a conducive business environment to attract investment of oil and gas resources.”
(someone needs a bullit through their thick skull!)
‘A HIGHLY SENSITIVE ISSUE’
U.S. officials at the meeting declined to comment.
“This is a highly sensitive issue and we do not want any publicity,” said one. “This is guidance by Iraqis for Iraqis facilitated by the U.S.” said another.
But briefing papers to the meeting obtained by Reuters showed a clear consensus among expert opinion favoring production-sharing agreements (PSAs) to attract the major oil companies.
“The PSA is certainly a favorite after short-term rehabilitation,” said Attar. “Everybody keeps coming back to PSAs.”
That is likely to thrill oil companies harboring hopes of lucrative contracts to develop Iraqi reserves that rank second in size only to Saudi Arabia’s.
Some oil company executives had thought post-war nationalism would prevent early access to oilfields that, apart from those in Saudi Arabia and Mexico, are the only significant reserves not yet open to commercial capital.
Production-sharing is the type of deal favored by the oil industry because it guarantees companies a healthy profit margin, even at low world oil prices. Alternative royalty schemes are weighted toward government revenue and can penalize investors at low prices.
Under PSAs Iraq would retain control over mineral ownership.
OIL FIELD FIRES BEING EXTINGUISHED
Short-term rehabilitation of southern Iraqi oil fields already is under way, with oil well fires being extinguished by U.S. contractor Kellogg Brown and Root, a subsidiary of Halliburton. Two wells remained ablaze on Saturday.
Long-term contracts are expected to see U.S. companies ExxonMobil, ChevronTexaco and ConocoPhillips compete with Anglo-Dutch Shell, Britain’s BP, TotalFinaElf of France, Russia’s LUKOIL and Chinese state companies.
Expert advice to the London meeting estimated $5 billion was needed for rehabilitation for output of 3.5 million barrels a day, nearly a million barrels daily more than existing capacity.
Legal preparations for long-term contracts with international oil firms should “be started concomitantly” with the repair work, one briefing said.
It estimated $30 billion to $35 billion will be needed to add another about another 4 million to 4.5 million barrels a day of production over a period of eight or nine years.
“Such a task will require the technological and managerial know-how of the international oil companies,” it said. “Given Iraq’s present lack of investment capital and technical talent, production-sharing contracts might be the most feasible relationship.”
The group advised that Iraq remain in OPEC, but without the cap on production that applies to other members of the Organization of the Petroleum Exporting Countries.
“There should be no problem with OPEC until we reach the 3.5 million we had before sanctions,” said Attar. “After that we will have to raise the question of our special case for rebuilding.”
A briefing paper said: “The prime objective of oil policy should be the maximization of oil export revenues. It would be up to OPEC to keep Iraq within the organization by allowing it to produce at will.”
OPEC CONCERN ANTICIPATED
That is likely to raise fears in OPEC of a showdown on quotas, undermining the Saudi-led OPEC strategy of production restrictions aimed at supporting $25-a-barrel crude.
Saudi is the prime candidate in OPEC for cutting back production to accommodate a resurgent Iraq. Riyadh has expanded supply most since U.N. sanctions were imposed against Iraq after Saddam Hussein’s invasion of Kuwait 12 years ago.
Iraqi state oil companies in the north and south and the State Oil Marketing Organization (SOMO) appear set to survive the early days of an interim U.S.-led authority.
But advice to Saturday’s meeting was that SOMO be reorganized quickly. Restructuring and a possible 30 percent partial privatization of the state companies could come afterward, according to one briefing paper.
Delegates said the group did not discuss names for those that might run Iraq’s oil industry in the short term.
Phillip Carroll, the former head of Shell in the United States, is said to be a candidate to oversee oil policy with Iraqi economist Muhammad-Ali Zainy in line to become his second in command.
http://www.msnbc.com/news/896012.asp?0si=-
Big role urged for oil firms after war
Iraqi delegates recommend profit-sharing deals to boost production Iraqi workers tend to a pipe at the Iraqi-Turkish pipeline in Karkuk, northern Iraq, in a December 2000 file photo.
LONDON, April 5 — Iraqi exiles and senior U.S. officials agreed Saturday that international oil companies should take a leading post-war role in reviving Iraq’s oil industry, delegates to a policy meeting said.
THE TALKS, held under the auspices of the U.S. State Department, also resulted in a recommendation that Baghdad stay in OPEC, though without limits on production, Iraqi delegates said.
Although early work will focus on the rehabilitation of existing facilities, talks with foreign oil majors on long-term projects could start quickly, the said.
“It is in Iraqis’ interest for an interim period of government to be as short as possible,” said Dara Attar, an oil consultant representing some opposition groups.
Foreign investment deals, most likely production-sharing contracts, with a full-fledged Iraqi government could come in between six months and two years time, he said.
“Yes, that is the idea because there is no doubt the oil companies are needed,” said Fadhil al-Chalabi, a former under-secretary at the Iraqi oil ministry who attended the meeting.
The guidance will go to a U.S.-run interim authority and a subsequent transitional government. It is likely to be published in about two weeks time.
The recommendations came from the fourth meeting of the oil and energy working group of the State Department’s Future of Iraq project run by Thomas S. Warrick, special adviser to the U.S. assistant secretary of state for near eastern affairs.
A statement afterward called for Iraqi oil and natural gas to be exploited for the benefit of the Iraqi people.
It added: “The country should establish a conducive business environment to attract investment of oil and gas resources.”
(someone needs a bullit through their thick skull!)
‘A HIGHLY SENSITIVE ISSUE’
U.S. officials at the meeting declined to comment.
“This is a highly sensitive issue and we do not want any publicity,” said one. “This is guidance by Iraqis for Iraqis facilitated by the U.S.” said another.
But briefing papers to the meeting obtained by Reuters showed a clear consensus among expert opinion favoring production-sharing agreements (PSAs) to attract the major oil companies.
“The PSA is certainly a favorite after short-term rehabilitation,” said Attar. “Everybody keeps coming back to PSAs.”
That is likely to thrill oil companies harboring hopes of lucrative contracts to develop Iraqi reserves that rank second in size only to Saudi Arabia’s.
Some oil company executives had thought post-war nationalism would prevent early access to oilfields that, apart from those in Saudi Arabia and Mexico, are the only significant reserves not yet open to commercial capital.
Production-sharing is the type of deal favored by the oil industry because it guarantees companies a healthy profit margin, even at low world oil prices. Alternative royalty schemes are weighted toward government revenue and can penalize investors at low prices.
Under PSAs Iraq would retain control over mineral ownership.
OIL FIELD FIRES BEING EXTINGUISHED
Short-term rehabilitation of southern Iraqi oil fields already is under way, with oil well fires being extinguished by U.S. contractor Kellogg Brown and Root, a subsidiary of Halliburton. Two wells remained ablaze on Saturday.
Long-term contracts are expected to see U.S. companies ExxonMobil, ChevronTexaco and ConocoPhillips compete with Anglo-Dutch Shell, Britain’s BP, TotalFinaElf of France, Russia’s LUKOIL and Chinese state companies.
Expert advice to the London meeting estimated $5 billion was needed for rehabilitation for output of 3.5 million barrels a day, nearly a million barrels daily more than existing capacity.
Legal preparations for long-term contracts with international oil firms should “be started concomitantly” with the repair work, one briefing said.
It estimated $30 billion to $35 billion will be needed to add another about another 4 million to 4.5 million barrels a day of production over a period of eight or nine years.
“Such a task will require the technological and managerial know-how of the international oil companies,” it said. “Given Iraq’s present lack of investment capital and technical talent, production-sharing contracts might be the most feasible relationship.”
The group advised that Iraq remain in OPEC, but without the cap on production that applies to other members of the Organization of the Petroleum Exporting Countries.
“There should be no problem with OPEC until we reach the 3.5 million we had before sanctions,” said Attar. “After that we will have to raise the question of our special case for rebuilding.”
A briefing paper said: “The prime objective of oil policy should be the maximization of oil export revenues. It would be up to OPEC to keep Iraq within the organization by allowing it to produce at will.”
OPEC CONCERN ANTICIPATED
That is likely to raise fears in OPEC of a showdown on quotas, undermining the Saudi-led OPEC strategy of production restrictions aimed at supporting $25-a-barrel crude.
Saudi is the prime candidate in OPEC for cutting back production to accommodate a resurgent Iraq. Riyadh has expanded supply most since U.N. sanctions were imposed against Iraq after Saddam Hussein’s invasion of Kuwait 12 years ago.
Iraqi state oil companies in the north and south and the State Oil Marketing Organization (SOMO) appear set to survive the early days of an interim U.S.-led authority.
But advice to Saturday’s meeting was that SOMO be reorganized quickly. Restructuring and a possible 30 percent partial privatization of the state companies could come afterward, according to one briefing paper.
Delegates said the group did not discuss names for those that might run Iraq’s oil industry in the short term.
Phillip Carroll, the former head of Shell in the United States, is said to be a candidate to oversee oil policy with Iraqi economist Muhammad-Ali Zainy in line to become his second in command.
