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U.S. Analyst Says Western Oil Giants Likely To Get To Work Soon In Iraq

Iraqi Oil Minister Hussain al-Shahristani
Iraqi Oil Minister Hussain al-Shahristani
Iraq's government has opened six oil fields to bids from foreign oil companies in an effort to increase production and boost revenues.

Oil Minister Hussain al-Shahristani says the increased drilling is expected to add 1.5 million barrels a day to Iraq's production capacity. The six oil fields already are producing, al-Shahristani says.

Among the 35 companies who will make bids are several from the West, including Exxon Mobil, Total, Shell and BP.

But Amy Myers Jaffe, the associate director of the Rice University Energy Program in Houston, says none of this means that foreign oil giants are necessarily going to begin drilling immediately.

Jaffe tells RFE/RL that everything will depend on the companies themselves and the security situation in the region in which they want to drill. But for the most part, she says, they're used to operating in unstable regions.

She points to Chevron Corporation operating in Angola during its long civil war, for example, or Shell and Exxon-Mobil drilling in Nigeria.

"We're not talking about an American company or European companies that have never gone overseas and don't know how to operate in risky domains," Jaffe says. "I am sure that the companies have systems that have been developed over decades on how to secure their personnel in strife-torn areas, and they will use those systems for operating in Iraq."

Jaffe cautions against being "overly optimistic" about the success of Iraqi oil production anytime soon, and not solely because of the country's lingering security problems.

Meanwhile, the Iraqi government has filed civil suit in a U.S. federal court against dozens of companies -- including oil giant Chevron Corp. -- for more than $10 billion, saying they paid kickbacks to former Iraqi leader Saddam Hussein's government under the UN's oil-for-food program.

Jaffe also notes that the oil fields were improperly exploited under the late President Hussein. For example, she says, oil workers injected improper material into some large oil reservoirs to force out oil in efforts to meet production quotas on short deadlines. This, she says, can leave the oil fields damaged.

"It's going to be a little uphill," Jaffe says. "The good news is you are going to have more technology and some technology management coming in, some experienced project management coming in, and you have a great potential in terms of training. The companies are very experienced at training local technicians and oil workers. So I think we'll see some improvement there, and some better techniques, and that is going to help."

Jaffe says that at first, the foreign operators probably will have to avoid the larger, damaged reservoirs and focus on what she calls "satellite" reservoirs until they can repair the damaged reservoirs, which have the potential for larger oil yields.

But those are only the technical problems. There is also a political hurdle in how to divide the revenues equitably among Iraq's feuding ethnic groups: the majority Shi'a, the once-dominant Sunnis, and the Kurds.

The Iraqi parliament has been working on a distribution formula for years and is reportedly close to resolving the issue. But Jaffe warns that such a scheme must be fair to all three groups in order to avoid kindling sectarian violence, no matter how much oil any Western companies extract from Iraqi soil.

"If, inside the country, we all can't agree as politicians and as militia leaders how we're going to split that higher revenue, then there's going to be a problem. So ultimately, beyond the technical problems, the political problem is not yet resolved," Jaffe says. "The Iraqi parliament should endorse the idea that oil revenue would be divided on a per capita basis. There's no better way."

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