[wvns] The New Iraqi Oil Law
The New Iraqi Oil Law
By Ghazi Sabir-Ali
http://www.petroleumworld.com/SF07042901.htm
Iraq today is an occupied country in a state of chaos with sectarian
violence rife, hundreds of people killed and maimed daily, police and
security forces infiltrated by militias and warlords' henchmen. The
infrastructure of society is destroyed; hospitals lack equipment and
medicines and, indeed, doctors, as so many have fled from the everyday
brutality that is Iraqi life today. In order to gain the participation
of all groups in the political process it was agreed that the
constitution should be amended. This has still not been done. Petrol
in an oil rich country is in short supply. And in this maelstrom of
unrest and violence the Iraqi government has passed a draft oil law
which many Iraqis, experts in economics and the petroleum industry,
look on with horror, considering it to be passing over the wealth of
Iraq to foreign companies, and thus its ability for present and future
generations to rebuild the country. Is it right that in such an
atmosphere a law is being enacted which will affect the future
livelihood of the Iraqi people for generations to come?
What does the new law entail? The controversial Production
Sharing-Agreements (PSAs) have been dropped but it is still proposed
to hand over exploration and drilling contracts for decades on terms
that could be disproportionately profitable to the contracting
companies and unfair to Iraqis. Iraq would be unable to change them
for many years to come.
Is this the answer to Iraq's problems? Since sanctions were introduced
in 1990 the oil production industry has become perilously run-down.
Equipment and machinery are old and badly maintained due to the ban on
importation of spare parts. The extraction of oil from reservoirs has
been badly mismanaged. These problems are in urgent need of resolution
before any implementation of massive increases in production. A plan
to set matters right in the production and processing of oil in order
to increase exports from the present 2mn b/d to the pre-First Gulf War
level of 3.3mn b/d should be implemented immediately. Only when Iraq
has some urgently needed income can the government begin negotiations
with foreign companies to take the major step of doubling production
to 6mn b/d.
Iraqi Oil Experts
Who can implement the first part of the rehabilitation of Iraq's oil
industry? Iraq has a vast contingent of oil experts skilled in all
aspects of the industry: petroleum and reservoir engineers,
geologists, drillers etc, as well as engineers and scientists who deal
with the overground aspects. These experts ran Iraq's oil companies
with skill and efficiency before the nationalisation of the Iraq
Petroleum Company in 1972 – at that time, of 5,000 employees only
eight were foreign nationals – up to the present time. I was Deputy
Chairman, then Chairman, of the North Oil Company (NOC) from 1980 to
1993 with a workforce of 10,000 and I had the privilege of leading
this team of highly capable Iraqis, who came from different
backgrounds and different geographical areas. We executed giant
projects with – and without – the help of foreign contractors, such as
the first underground storage project in Iraq, artificial lifting of
oil from depleted wells and the building of several large overground
crude oil complexes. After the first Gulf War, we rebuilt a devastated
NOC in a short time. In all the cases where foreign companies were
employed, NOC was in charge overall.
I cannot emphasise enough the capabilities of NOC's workforce; and the
same applies in the south. In the disciplines of reservoir
engineering, geology and crude oil production they are second to none.
A great deal of finance will obviously be needed, especially as Iraq's
overseas reserves have already been squandered by mismanagement on the
part of the occupying forces. Technical help from foreign contractors
will also be required but this should be on the same basis as above
with Iraq's oil industry in control. The contracts negotiated will
need to be generous due to the unstable state of the country, but not
a free gift of most of Iraq's oil, and the carrot of huge future
contracts can be dangled in front of the foreign companies.
When the situation has stabilized and security prevails, Iraq can then
build up production to 6mn b/d, an immense undertaking. To achieve
this aim, exploration and drilling on a huge scale must take place, as
well as the construction of major industrial complexes. This will
entail developing giant and super-giant fields especially in the
south. It is here that Iraq will need a great deal of financial and
technical help. The sums will be huge but the rewards for both Iraq
and the participating foreign companies will be great. In the late
1980s and early 1990s the Iraqi government was looking into the
feasibility of PSAs and there is no reason, if they are negotiated in
a fair and honest way to both sides, why they cannot be used for these
important new developments. However, now is not the time for them;
Iraq is an occupied country in desperate straits negotiating from a
position of weakness. It has been acknowledged that the new draft oil
law has had input from various non-Iraqi sources.
Development In Stages
So any development of Iraq's oil industry should be undertaken in
stages, first rebuilding and maintenance in the next few years in
order to increase oil production to the pre-1990 level of 3.3mn b/d;
once this has been established an increase to 6mn b/d and, eventually
in the long term, to the level of Saudi Arabia's production of 10mn
b/d can be carried out. At all times Iraq should be in charge of its
oil industry and not in any way pass control to foreign companies.
Let Iraqis rebuild and develop their oil industry themselves. It will
be a transgression of major proportions against the Iraqi people if
foreign companies control Iraq's oil, whether through PSAs or any
other form of agreement. Iraq must be in charge of an industry which
is the country's only real source of the income it so desperately
needs to rebuild the infrastructure and lift the population out of the
poverty into which three wars and foreign occupation have driven it.
The knowledge and skill are available. Some of the foreign oil
companies are like pigs, voraciously gathering around the food trough.
They must not be allowed to leave only the dregs for the Iraqi people.
Ghazi Sabir-Ali is a former chairman and managing director of Iraq's
Northern Oil Company (NOC) in Kirkuk from December 1989 to October
1993, having previously served as Deputy Chairman. (ghazi
@sabir-ali.fsnet.co.uk).
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