The oil multinationals have begun counting barrels, jumping ahead to the US victory over Saddam well before it is hatched.
Iraq’s oil reserves are second only to Saudi Arabia’s estimated 250 billion barrels and historically under-exploited. Baghdad puts those reserves at 140 bbs, which European experts consider over the top. Their estimate is roughly 100-112 bbs.
In the years before 1972, when Baghdad nationalized its oil industry, IPC, a subsidiary of Royal Dutch Shell, ruled the roost. Its policy was to hold production down and sell the oil at a premium – in contrast to its US competitor in Saudi Arabia, Aramco, who from 1933 to 1980 maintained a comparatively high production level and sold at relatively low prices.
DEBKA-Net-Weekly‘s oil experts see a new era dawning for Iraq’s oil industry after a pro-American regime is installed in Baghdad, sparking a rush among multinational companies for contracts to control and develop Iraq’s black gold.
The new Iraq, banking on Washington’s support, will seek to attract US oil companies to oilfield development. President George W. Bush’s policy objective of cutting down American dependence on Middle East oil is not expected to interfere with the American corporate bid for a stake in Iraq’s unexploited oil potential – if only to keep others out.
Russian companies (the consortium led by Lukoil) and France’s TotalFinaElf, will, however, fight tooth and nail to validate the concessions granted them in the 1990s for the development of some Iraqi oil fields, which UN sanctions against the Saddam regime prevented them from executing.
In the war’s aftermath, there will a drive to enhance Iraq’s oil potential in the short term. But making a long-term oil superpower out of Iraq on the Saudi scale will take decades and be predicated on a sustained pro-American orientation in Baghdad.
Our experts warn however, that a pro-Western orientation has never stopped any Baghdad regime making an aggressive bid for hegemony over the Arab world, a policy that traditionally triggers its radicalization. The future therefore holds the threat of a vicious circle: revived frictions between Iraq and its neighbors that will again undercut its potential as an oil power.
At the moment, only about half of Iraq’s oil potential is being exploited because it lacks the technology and the know-how. An all-out effort to bring this oil industry up to speed will not yield results before five to ten years, but then will double Iraq’s current output of six million barrels and treble its oil profits, partly at the expense of other Gulf oil producers. Saudi Arabia’s pride of place in the world oil market would be challenged as Iraqi oil gains eminence. The Saudis could find themselves with a fight on their hands to attain the exporting level needed to keep their economy afloat. This fight would color Riyadh’s foreign policy and rock the throne.
However, regime change in Baghdad is not expected to rattle the world oil market. There will be no rush to exploit Iraq’s oil potential; the US and oil multinationals are too deeply engaged in developing the Caspian reserves for that. But the Russian and French companies will be keen to exploit their hung-up concessions and move ahead toward developing Iraq’s existing oil fields. After Saddam is gone therefore, Iraq’s oil production capabilities can b expected to double quite quickly, at the expense of other major oil players in the Gulf, such as Saudi Arabia and Iran.