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IRAQ-OIL: OPEC Interests a Possible War Casualty
By Humberto Márquez
CARACAS, Apr 9 (IPS) - U.S.-based oil companies will get the
lion's share of the petroleum business in Iraq once the war there
is over, undermining the interests of OPEC (Organisation of
Petroleum Exporting Countries), say oil industry experts, who also
warn that an end to the war will not immediately translate into
abundant supplies of inexpensive crude.
As Baghdad fell to the U.S. forces Wednesday, the question
"What happens next?" took on greater immediacy.
"There is no doubt that the military occupation of such an
important oil exporting country, with a nationalist government, is
creating cracks in OPEC and affecting the mid- and long-term
interests of its other members, like Venezuela," says Víctor
Poleo, a professor of graduate studies in oil economics at the
Central University (UCV), in Caracas.
After the war "there will be a substantial increase in Iraqi
oil production, and I wouldn't be surprised if schemes emerged to
weaken, if not destroy, OPEC," said Humberto Calderón, a former
Venezuelan minister of energy and of foreign relations, in a
conversation with IPS.
The United States has been trying for some time to reduce its
dependence on oil supplies from the Persian Gulf region, home to
the dominant members of OPEC, an 11-country cartel comprising
Algeria, Indonesia, Iran, Iraq, Kuwait, Libya, Nigeria, Qatar,
Saudi Arabia, United Arab Emirates and Venezuela.
That was the aim of the controversial energy plan that George
W. Bush brought with him to the U.S. government, in which he has
sought to expand oil exploration and exploitation within his
country's own territory, even in the protected natural areas of
Alaska.
But control of Iraqi oil wealth could turn into alleviation for
U.S. oil worries and a key to reducing prices - and to wielding
influence over OPEC.
However, not all experts believe that after the war it will be
easy for petroleum investments in Iraq to flourish.
"It would be a mistake to assume that immediately after the
U.S. occupation there would come a prolonged period of political
stability in Iraq and surrounding areas," warns another graduate
professor at UCV, Mahzar al-Shereidah, an Iraqi-Venezuelan.
The "stability factor", Al-Shereidah told IPS, "is fundamental
for the materialization of oil industry projects."
"The big oil companies are very aware of the rich subsoil in
Iraq, but an occupying regime creates additional risks to dealing
with political, ideological, cultural and religious factors. And
the corporations are going to take that into account," he added.
Iraqi territory holds 112 billion barrels of petroleum in
proven reserves, the second largest volume within OPEC, after
Saudi Arabia's 260 billion barrels.
And Iraq's crude is relatively easy to extract from the ground.
Each oil well represents major output because production costs are
just two dollars per 159-litre barrel. Because it is light, sweet
crude it is easily refined and has little sulphur or metal
residue.
But "the extreme cruelty of this invasion, which has affected
entire peoples, awakens deep sensitivities in a nation that is
proud of resisting the conquerors. We are going to witness the
allotment of war booty and the United States will take the lion's
share - but it will not be effortless," Al-Shereidah commented.
According to former oil minister Calderón, Iraq could double
its output of 2.4 million barrels daily within a short time. Prior
to the war, total production was limited through the "oil for
food" programme, overseen by the United Nations in the context of
the embargo imposed against Baghdad for invading neighbouring
Kuwait in 1990.
As Iraq's role as a supplier increases, "the OPEC countries
will be elbowing each other out of the way" to win markets,
pushing prices down, Calderón predicts.
Fadhil Chalabi, an Iraqi national and former OPEC secretary-
general, goes even further. He believes his country could even
double its proven reserves through intense oil exploration,
becoming a "super-giant producer", like Saudi Arabia, putting as
much as 10 million barrels on the international market each day.
In addition to its oil output potential, Iraq has geographic
advantages that reduce the cost of reaching global markets. Its
petroleum can be shipped via its port on the Persian Gulf and, to
bypass the vulnerability of the Straight of Hormuz between the
Gulf and the Arabian Sea, through the pipelines connecting Iraqi
oil fields to the Mediterranean and Red seas.
Iraq as a super-giant producer of crude oil managed by U.S.-
based companies would crown the dearest dream of the leaders of
the governing Republican Party: "to bring OPEC to its knees,"
forcing the cartel - through competition from Iraq - to sell its
oil at lower prices, says Chalabi.
In the opinion of the former OPEC official, the depression of
prices and the abundance of oil in Iraq will prompt investors to
shift their focus away from higher-cost areas, like the North Sea,
where Britain and Norway extract oil.
They will turn to areas with lower production costs, precisely
those of OPEC and the Persian Gulf region, he says.
UCV professor Poleo believes the "U.S. empire will want to hold
the keys to all major oil sources, and that will ultimately
include the Andean-Amazon oil reserves, which extend from Trinidad-
Tobago, through Venezuela, Colombia, Ecuador, Peru and Bolivia."
Venezuela is the fifth leading OPEC member in terms of
conventional crude reserves, at 77 billion barrels, but it also
holds 270 billion barrels of unconventional, extra-heavy and
bituminous crudes.
The 11 OPEC countries have managed their output during the past
two decades to maintain stability in the average price of the
cartel's "basket" of seven crudes. They consider the optimal price
range for consumer and producer nations alike to be 22 to 28
dollars a barrel.
OPEC "rejects the notion of using petroleum as a political
weapon," stressed a former secretary-general of the organisation,
Alí Rodríguez, current president of Venezuela's state-run oil firm
PDVSA.
As such, OPEC has made an effort prior to and during the war in
Iraq to ensure a consistent supply of oil to its clients in the
industrialised world.
The markets have seen petroleum prices decline from a mean of
32 dollars per barrel before the war to fluctuating around 26
dollars a barrel two weeks after the invasion of Iraq began.
The situation kept in step with the advances of the U.S.-
British forces in Iraq, though OPEC suggested Tuesday that its
members might cut back production in order to buoy up prices.
Another major factor influencing the oil markets is the
potential for fat profits for the companies winning contracts for
the reconstruction of a country emerging from years of war and
economic embargo.
The Bush administration - which Poleo describes as "an oil
directorate" because of the links between U.S. officials and
energy and aerospace firms - has already made clear that it will
control the reconstruction contracts, which are estimated to be
worth 30 billion to 100 billion dollars.
U.S. Secretary of State Colin Powell said Iraqi revenues,
particularly those from the oil industry, would serve as resources
for rebuilding the country.
The first companies to win some of these contracts were
International Resources Group, to coordinate humanitarian aid
efforts, Stevedoring Services of America, to run the Um Qasar
petroleum shipping terminal, and Kellogg Brown & Root, to control
oil wells that have been set on fire.
The latter is a subsidiary of Halliburton, a major petroleum
industry construction firm, which until 2000 was headed by U.S.
Vice-President Dick Cheney.
For the exploitation of the Iraqi oil fields, "it is certain
that U.S. and British firms will have priority, and will try to
make up for their absence in Iraq during the 12 years of the
embargo, and Baghdad to back down from partnership contracts with
oil companies from China, France and Russia," said Al-Shereidah.
Firms from the three countries signed letters of intent for oil
development that would require investments of more than 40 billion
dollars. The big question now is to what extent those contracts
will be respected in the allocations of post-war Iraq.
As far as the Iraq National Oil Company, the government
enterprise that managed the petroleum industry until now, "it is
very possible that it will remain, though it might be partially
privatised to facilitate the distribution of percentages the
United States will collect for the costs of the war and those
earmarked for expenses and investment in Iraq," said Al-Shereidah.
(END/2003)
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