Oil and gas options not in short supply

Aug.22, 2008



Oil and gas options not in short supply

We could easily guess who is targeted in the ongoing focus on Iraq's oil industry, with American advisers warning that political gridlocks more than security risks are blocking the rehabilitation of the country's hydrocarbon sector.
Definitely, it is a message to the Iraqi parliament that it should move quickly to adopt a US-drafted law on the country's oil industry and grant concessions to major international players in the oil and gas sectors.
Obviously, at stake are the interests of the half a dozen or so American and European oil companies which were rubbing their knuckles in glee in anticipation of lucrative oil deals. They were hoping for open-ended deals on their terms under the draft oil law. But when it became clear that the draft bill has little chance of being adopted by the Iraqi parliament, the American advisers of the Iraqi Oil Ministry came up with a stopgap measure: Short-term technical contracts that would allow the oil companies to take their first solid step into the Iraqi oil industry.
However, the resurgent Iraqi government, mindful of the pitfalls of writing away their country's hydrocarbon wealth to the West, delayed the signing of the short-term oil service contracts with oil majors due to disagreements over payment terms and their duration. And it has also become clear that Iraq would not give companies that signed short-term contracts preferential treatment for the more sought-after long-term deals.
Now the American advisers of the Iraqi Oil Ministry, are trying to tell the Iraqi government that it is not the way to do things by issuing warnings.
But the call would not find many takers in Iraq. Politicians and community leaders in the chaotic country have become acutely aware of the Western objective of tapping their country's oil wealth while giving little to the people of Iraq.
Iraq's electricity minister, Karim Waheed, placed his finger on the pulse when he charged this week that international oil companies are trying to overcharge the war-torn country instead of helping develop its oil and gas sector.
According to Waheed, foreign oil companies had counted on Iraq's ignorance of the markets in trying to overcharge the country in a time of need.
"Some companies in those cases demanded sky-high prices for their services, thinking Iraq does not have a grasp of international financial markets. They were unpleasantly surprised when they found out we fully understand global commodity markets and global stock markets," he said.
Well, Waheed and his colleagues in the Iraqi cabinet do not need to look too far for alternatives. They could turn to the oil companies from the eastern part of the world, including China, India, Malaysia and others, which were bluntly denied the short-term contracts, and develop a healthy and mutually beneficial working relationship with them.
That approach would also fit in with the newfound independence and confidence that the Iraqi government had been asserting while dealing with the American military occupiers of the country.