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Rush For ‘easiest Oil In The World’

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Rush for ‘easiest oil in the world’

This month an Iraqi politician will appear on television to open envelopes and reveal the winners of a long and hard-fought contest. In the balance hangs the wellbeing of 28m people, tens of billions of dollars of contracts and how much you and I pay for everything from yoghurt pots to petrol.

It should make good viewing. For the hopeful contestants, it has been a long wait — since 1972 to be exact. That was when the Iraqi oil industry was nationalised and foreign operators were booted out.

Now the oil giants have been invited back. At the ceremony on June 29 and 30, Hussain al-Shahristani, the oil minister, will reveal which of them will be the first to be let back into the south of the country, where most of its oil and gas resources are found.

Up for grabs are 20-year concessions to operate six huge oilfields and two gas fields. In all, 32 companies are bidding, including BP, Shell, Sinopec of China, Lukoil of Russia and Total of France.

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“It’s a once-in-a-lifetime opportunity,†said Manouchehr Takin, analyst at the Centre for Global Energy Studies. “Fields like this don’t exist anywhere else in the world.â€

The excitement is understandable. Iraq owns the world’s largest oil reserves after Saudi Arabia and Iran, but produces the same amount per day, about 2.5m barrels, that it did in 1976. Decades of underinvestment, wars, Saddam Hussein’s regime, and political infighting have meant that hundreds of billions of dollars worth of the black stuff have remained underground.

There have been many false dawns, however, and jumping back into the oil industry in Iraq brings as much risk as opportunity.

The country is still occupied by more than 130,000 American troops and nobody can be sure how the security situation will hold up. Visitors to Kurdistan, the most stable part of the country and where many of the early oil deals have been struck, still travel in armed convoy. Hotels are cordoned off behind blast walls patrolled by guards wielding AK47s.

The contracts have been put out to tender but a highly controversial hydrocarbon law — intended to govern how oil proceeds are split among the population – remains locked in parliament, more than four years after it was first proposed.

Al-Shahristani is fighting for his political life. He has been heavily criticised in recent weeks by MPs angry about the stagnation of the industry at a time when the country desperately needs revenue.

Yet the oil companies are unfazed by the uncertainty. Iraq is sitting on 115 billion barrels of proven reserves. At a time when explorers are going to great lengths to get at new sources, Iraq’s is the “easiest†oil in the world. It costs between $2 and $4 a barrel to extract, compared with $50 or more for tar sands or deep-sea drilling.

In its annual review of world energy, BP announced last week that global reserves fell for the first time in more than a decade. Lambert Energy, a consultancy, predicts that at present rates of decline the world will need 40m barrels a day of new production capacity within a decade just to keep up with current demand.

Philip Lambert, its founder, said: “The world needs Iraq, both the north and the south, to work. There is nothing else that can fill the gap.â€

So will this latest initiative succeed? Industry insiders say it has a good chance. On June 1, Jalal Talabani, the Iraqi president, hosted a gala ceremony celebrating the connection of a pipeline out of Kurdistan, in the north of the country. It was a momentous occasion. It connected two fields, Taq Taq and Tawke – the first to be developed since the 1970s – to the port of Ceyhan in Turkey.

Talabani’s presence was key. Since 2003, the Baghdad government and Erbil, the capital of the semi-autonomous Kurdistan, have been locked in a bitter row. Ashti Hawrami, the Kurdish oil minister, has signed 30 contracts with foreign companies without the blessing of the federal oil ministry. These so-called production-sharing agreements are generous. They give oil companies a 10%-20% cut of revenues.

The deals infuriated Al-Shahristani, who blacklisted any company that dealt with the Kurds. That is why no big oil company entered the region, leaving it to minnows such as Heritage Oil, Addax Petroleum and Norway’s DNO.

Talabani’s blessing at the opening was seen as a shift in the government’s stance. Uncertainties remain, though. The Kurdish contracts have yet to be ratified by parliament, while the law to determine how oil income – 95% of Iraq’s GDP – will be distributed remains mired in controversy.

The deals offered to the oil giants in the south won’t be nearly as attractive as those in Kurdistan. They are technical contracts, under which companies are paid a fee to increase production. Oil groups have found such deals in other countries such as Iran unappealing. However, the contracts do provide for additional payments if production targets are passed.

Fortunes are already being made. Last week Heritage, the group run by Tony Buckingham, agreed a merger with Genel Enerji, a Turkish group that shares ownership of the Taq Taq and Tawke fields. After the deal, Buckingham’s 16% stake in the new group, which is set to enter the FTSE 100, will be worth about $1 billion (£610m).

Sinopec and Korea National Oil Company are circling Addax , the London and Toronto-listed group that also has operations in Kurdistan. It could be taken over for as much as $8 billion, which would mean a $2 billion payday for boss Jean Claude Gandur, who owns about a third of the firm.

Since 2003, the oil giants have been manoeuvring for position. BP sent in workers to help the government carry out field studies.

The big prizes lie in exploration because much of the country’s oil remains undiscovered – Takin estimates that up to 200 billion barrels could be realised – and that would put Iraq comfortably ahead of Saudi Arabia as the world’s largest owner of oil reserves.

The Iraqi government will this year auction off new blocks for exploration. Paul Atherton, chief financial officer of Heritage Oil, said: “It’s all about getting in early and cherry-picking the best assets.â€

This one of course is huge news for the West.

Depending on how this plays out, we may see a big reduction in our very own North Sea by the majors.

No drought share values will rocket for those lucky ones who land the big fields.

EDIT: There is of course the inherit danger of having Chinese oil interests landing big contracts, as this will have made the whole Iraq invasion a moot point.

Edited by cashinmattress

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Rush for ‘easiest oil in the world’

EDIT: There is of course the inherit danger of having Chinese oil interests landing big contracts, as this will have made the whole Iraq invasion a moot point.

Highly unlikely though - Uncle Sam won't let the Iraqis ignore their liberators in favour of China - save for perhaps a token contract or two to demonstrate "impartiality".

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Highly unlikely though - Uncle Sam won't let the Iraqis ignore their liberators in favour of China - save for perhaps a token contract or two to demonstrate "impartiality".

Yes, they (Americans) do have the worlds biggest and most secure 'embassy' in Iraq and 100k troops with the territory, but do not underestimate the influence of China in the Middle East either.

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The article is overstating the importance of Iraq, but then it is the mass media.

The concessions will be important, but

1.the demand-led fall in production we see today is only going to exacerbate decline rates in existing fields.

2. we can't have a low oil price any more, investment dies.

3. we need to add around 4.5mn b/d of capacity each year to stand still in production terms.

so the idea iraq will influence how much we pay for everything is really ~ minimal.

it is more important for individual companies/executives. the war in iraq was predominantly a war for oil, but more so it was a war for the elite class. for most ordinary people it is not so crucial. 1.5mn dead for corporate and elite interests...

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Utter nonsense Danny

You warmongers have been ballyhooing this chimera for years now. The result? Zip. Nada. Zilch.

The only contracts that have been actualised are restoration of Lukoil's big W. Qurna development, the very same deal they had with Saddam Hussein, and a couple of agreements with China and Iran.

By the way, there was nothing unique about Saddam Hussein's dealings with big oil in the 70's, his policies were similar to everyone else's. Maybe that's part of the reason why Iraq was extended over ten billion dollars in ag credits from the US in the 80's.

"Easiest oil in the world" eh???

It was much easier under Saddam when security was not an issue.

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I proved my point ...

Danny boy wrote this same drivel over two years ago:

CorpWatch : UK: Iraq poised to end drought for thirsting oil giants

by Danny Fortson, The Independent (UK) January 7th, 2007.

Broken record.

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"Easiest oil in the world" eh???

It was much easier under Saddam when security was not an issue.

Just the City of Baghdad is, according to statistics, 87 times as dangerous as it was under Saddam.

Any contractor going near Iraq at the moment has a death wish.

Meanwhile, the fields of 'easiest oil' have not been husbanded during years of war and were poorly maintained during sanctions. Prior to the invasion, McKinsey reported that the oil industry in Iraq would need ten years of investment. Since then, the country has had 5 years of war and its infrastructure bombed to smithereens. The Coalition comprehensively destroyed everything it hoped to gain.

You can't travel anywhere in Iraq without an armed convoy, so how does any investor propose to secure miles of pipelines? The whole country has been trashed for at least a generation. This is a real nonsense article.

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Highly unlikely though - Uncle Sam won't let the Iraqis ignore their liberators in favour of China - save for perhaps a token contract or two to demonstrate "impartiality".

Looks like something went wrong for Uncle Sam, because the BP - CNPC (China National Petroleum Corporation) has landed the contract for Iraq's biggest oilfield, the only sucessful foreign bid in these auctions.

http://www.telegraph.co.uk/finance/newsbys...l-contract.html

The Middle East really has been one major F-up for the yanks, hasn't it?

Best,

L

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Looks like something went wrong for Uncle Sam, because the BP - CNPC (China National Petroleum Corporation) has landed the contract for Iraq's biggest oilfield, the only sucessful foreign bid in these auctions.

http://www.telegraph.co.uk/finance/newsbys...l-contract.html

The Middle East really has been one major F-up for the yanks, hasn't it?

Yes is the short answer.

As the article explains, Exxon didn't want to bid at the low contract price. So hardly a glittering prize for BP.

The auction concided with the US stopping routine city patrols, a further security deterrent to US contractors.

Quote

With a Whimper, not a Bang;

The End of American Iraq

T.S. Eliot wrote at the end of "Hollow Men" in 1926, "This is the way the world ends/ Not with a bang but a whimper." He may as well have been talking about the war George W. Bush launched in Iraq in 2003.

The end of routine, independent patrolling of major Iraqi cities by US troops today is a major milestone in modern Iraqi history.

Iraqi Prime Minister Nuri al-Maliki declared Tuesday "National Sovereignty Day." Some 86 US bases have been closed in recent weeks (see the Jim Muir report). The LAT says that on Monday night, people in Baghdad danced in the streets, sang and set off (non-lethal) fireworks even in the midst of a dust storm.

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Looks like something went wrong for Uncle Sam, because the BP - CNPC (China National Petroleum Corporation) has landed the contract for Iraq's biggest oilfield, the only sucessful foreign bid in these auctions.

http://www.telegraph.co.uk/finance/newsbys...l-contract.html

The Middle East really has been one major F-up for the yanks, hasn't it?

Yes is the short answer.

As the article explains, Exxon didn't want to bid at the low contract price. So hardly a glittering prize for BP.

The auction concided with the US stopping routine city patrols, a further security deterrent to US contractors.

Quote

With a Whimper, not a Bang;

The End of American Iraq

T.S. Eliot wrote at the end of "Hollow Men" in 1926, "This is the way the world ends/ Not with a bang but a whimper." He may as well have been talking about the war George W. Bush launched in Iraq in 2003.

The end of routine, independent patrolling of major Iraqi cities by US troops today is a major milestone in modern Iraqi history.

Iraqi Prime Minister Nuri al-Maliki declared Tuesday "National Sovereignty Day." Some 86 US bases have been closed in recent weeks (see the Jim Muir report). The LAT says that on Monday night, people in Baghdad danced in the streets, sang and set off (non-lethal) fireworks even in the midst of a dust storm.

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Rush for ‘easiest oil in the world’

This one of course is huge news for the West.

Depending on how this plays out, we may see a big reduction in our very own North Sea by the majors.

No drought share values will rocket for those lucky ones who land the big fields.

EDIT: There is of course the inherit danger of having Chinese oil interests landing big contracts, as this will have made the whole Iraq invasion a moot point.

The objective has now been achieved ;)

Edited by webchat

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From a geological standpoint, yes, Iraq has large quantities of very easy oil, and quite probably some excellent fields still to find.

However, from the point of view of people who would like to keep their arms, legs and heads attached to their bodies, or oil companies who actually want to get the oil from the well out of the country, there are significant drawbacks.

It really does sum up the sheer ineptitude of the invasion.. managing to fail to get oil out of Iraq is a bit like robbing a bank with a sherman tank, failing to get any cash out and leaving your wallet behind. Epic Fail..

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Guest Steve Cook
From a geological standpoint, yes, Iraq has large quantities of very easy oil, and quite probably some excellent fields still to find.

However, from the point of view of people who would like to keep their arms, legs and heads attached to their bodies, or oil companies who actually want to get the oil from the well out of the country, there are significant drawbacks.

It really does sum up the sheer ineptitude of the invasion.. managing to fail to get oil out of Iraq is a bit like robbing a bank with a sherman tank, failing to get any cash out and leaving your wallet behind. Epic Fail..

:lol::lol::lol::lol::lol:

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Just the City of Baghdad is, according to statistics, 87 times as dangerous as it was under Saddam.

Please source me that statistic :lol:

Are you sure it's exactly 87? Not 88?

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The objective has now been achieved ;)

So the achievement was a service contract with possible earnings equivalent to a few weeks cost of occupation?

Wow. That's great business savvy!

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So the achievement was a service contract with possible earnings equivalent to a few weeks cost of occupation?

Wow. That's great business savvy!

I think in the early days the US was spending over 2 billion a month. It is the most expensive oil in history without a doubt.

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yeah but it was paid for by the taxpayer and the profits will go to the banking industry via the energy companies...

socialising risk and privatising profit...

Iraq has been an enormous success, almost unquantifiable, if you are part of the ultra right wing neo-liberal elite... "the haves and the have mores" as GW calls them...

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I think in the early days the US was spending over 2 billion a month. It is the most expensive oil in history without a doubt.

But they have to spend money every month anyway just to keep their military alive and working.

Add in the money stays mostly within the USA, and eventually the Oil will pay for it.

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yeah but it was paid for by the taxpayer and the profits will go to the banking industry via the energy companies...

socialising risk and privatising profit...

Iraq has been an enormous success, almost unquantifiable, if you are part of the ultra right wing neo-liberal elite... "the haves and the have mores" as GW calls them...

Well, no. If you want to claim that they have profited from the oil price bubble that began with the invasion and its disruption of oil production, you have to overcome the fact that if that were their objective they could have simply increased their sanctions regime against Iraq and enforced it with US naval power at very little cost. That thesis does not withstand critical analysis. Nor does the claim that the money spent on the occupation remains within the US economy, in fact the entire global US military footprint is a phenomenal part of the US dollar ballance of payment problem.

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not talking about the oil price bubble at all. oil didnt rise because of iraq...two different subjects.

the US taxpayer paid for the war, then private companies bank/will bank the profits over the next X tens of years, mainly the banking sector will get it all.

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Looks like something went wrong for Uncle Sam, because the BP - CNPC (China National Petroleum Corporation) has landed the contract for Iraq's biggest oilfield, the only sucessful foreign bid in these auctions.

http://www.telegraph.co.uk/finance/newsbys...l-contract.html

The Middle East really has been one major F-up for the yanks, hasn't it?

Best,

L

Oh dear. This rather undermines the theory that the invasion was all about enriching US oil interests doesn't it? How embarrassing.

:huh:

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not talking about the oil price bubble at all. oil didnt rise because of iraq...two different subjects.

the US taxpayer paid for the war, then private companies bank/will bank the profits over the next X tens of years, mainly the banking sector will get it all.

Well the oil prices rose immediately after the invasion because it took 2.5 million barrels per day off line - a production level that has yet to be recovered. This is just factual history.

Also, US taxpayers have not "paid for the war". In fact the funds were borrowed from China and the Gulf Arabs and are still owed.

Profits to the US based profiteers such as Haliburton pale in relation to the massive losses to US firms caused by applying sanctions on Iran and Libya as well as the cost of higher oil prices and its drain on the US balance of trade. The US is a disproportionate importer of oil and as such is a net loser in higher oil prices even when one considers the Gulf Arab investment of petrodollars into US treasury debt instruments. We simply pay out more for our imports than they re-invest in our debt.

Edited by atheo

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