subject: Us Companies Set To Profit From Iraq's Oil Industry [print this page] U.S. companies went home from the December auction empty-handed, although they were somewhat more successful in the June bidding, when Exxon Mobil, after protracted negotiations, eventually won the right to develop the West Qurna 1 field in a partnership with Shell. The only other U.S. company that will be producing oil in Iraq is Occidental Petroleum, as junior partner in a deal with Eni, of Italy, and Korea Gas, of South Korea, to develop the Zubair field.
Still, in the oil-services sector, U.S companies are likely to do better. The success of the auction in December "implies a huge amount of service activity over the next two or three years," Andrew Gould, chief executive of Schlumberger, the oil field services giant, said during a conference call from Houston.
Halliburton, Schlumberger and Bechtel are among U.S. companies in line to win contracts worth billions of dollars to repair pipelines, rebuild terminals and upgrade other infrastructure so that Iraq will be able to bring its crude oil to market, industry analysts say.
A revitalized Iraqi oil sector would challenge the pecking order in OPEC and weaken Saudi dominance as the world's "swing producer" - the single mega-producer that in the past has been able to tweak the global price of oil by adjusting the spigot of its own production.
It would also put Iraq on course to pass its perennial rival Iran as the Gulf's second-largest producer - a development that would imply a significant realignment of power in the region. While Iran would remain the dominant power in the Gulf, even if its oil production slipped behind Iraq's, Tehran could feel an even greater urgency to develop its nuclear capability in order to maintain that dominance.
"A lot of things have to happen before Iraq gets up to six or seven million barrels a day and passes Iran, so this won't have an immediate impact" on Iran's nuclear strategy, said Christian Koch, a security expert at the Gulf Research Center, in Dubai. "But over the long term, it will certainly be a factor."
Still, as Mr. Koch noted, Iraq has a long way to go before it can cash in on the bounty of the auction in December. Security remains a major worry, and the weak and highly factionalized central government will have to find some way to deliver stability and continuity.
One big concern for the oil companies is the lack of a comprehensive national law to guarantee that contracts will be honored by future governments. Already, some opposition lawmakers have challenged the legality of those signed by Mr. Shahristani.
Another problem is the dispute over control of reserves in the semiautonomous
Kurdish region. Baghdad says contracts signed by more than two dozen foreign oil companies with the Kurdistan Regional Government are illegal.
The national elections due to be held in March will be watched carefully by the oil industry. Handing over so much control of the nation's oil wealth to foreign companies is something that "runs against the grain" of many Iraqis, warned Tariq Shafiq, a founding director in the 1960s of the Iraqi National Oil Co. Mr. Shafiq, writing in January in The Iraq Oil Report, questioned whether the next government would be so eager to court foreign oil companies.
