Saturday, May 05, 2007
Economist - oil law designed to benefit U.S. oil companies
Oil
(Al Jazeera) - A draft law being considered by the Iraqi parliament would enable US companies to take control of Iraq's oil industry, oil experts in the country say. The proposed bill, approved by the Iraqi government in February after months of wrangling, opens the country's oil sector to foreign investors 35 years after it was nationalised.
"The law is designed for the benefit of US oil companies," Ramzy Salman, an Iraqi economist who worked for the Iraqi oil ministry for 30 years, said. "If approved, it would take things back to where they were before the nationalisation of Iraq's oil in 1972." But he said the situation would be reversed when Iraqis regained their "true sovereignty".
Salman said: "If there is something that should be worked on, it is the [Iraqi] constitution. "The constitution contains serious gaps in terms of who is in charge of the oil and its revenues ... [despite the] oil in Iraq being under every Iraqi river, desert, marsh and farm." The new law, if approved, would authorise production share agreements (PSAs), which offer huge profits for foreign oil companies.
PSAs are normally ideal for poorer countries exploring virgin lands or wanting to extract oil from fields where the resource is well below the surface and are designed to protect investors from the risks involved in such exploration projects. But Iraqi oil experts say investors face virtually no risk, as the country's oil is the cheapest to extract worldwide, and is of such a high quality that it sells at a premium on world markets.
Issam al-Chalabi, Iraq's former oil minister, said PSAs were completely inappropriate for Iraq. He said: "An oil barrel in most of Iraq’s oilfields costs between 50 cents and one dollar to extract. Iraq's fields are also proven, and investing in them is risk-free. "These kinds of agreements are normally given when there is a risk, as the case in Sudan, Yemen and several other countries, where companies invest money with great risk that they would not find oil, or they find difficult to extract oil."
Al-Chalabi said PSAs were a highly profitable formula for oil companies and in many cases they were granted for "political reasons". "Iraq's PSA with the Chinese and Russians gave a profit percentage less than 10 per cent when the oil barrel price was around $25, but now the barrel is over $60 which means the percentage of 12.5 per cent is too high," he said.
Dhafir al-Ani, an Iraqi member of parliament, said: "The proposed oil law is the best possible in the current situation. "However, if there are some gaps in it, then the reason is the constitution, which contains several controversial issues and needs to reconsidered." Al-Ani agreed with Salman that the proposed law was a "political" deal to strengthen US allies in Iraq.
"The law is designed for the benefit of US oil companies," Ramzy Salman, an Iraqi economist who worked for the Iraqi oil ministry for 30 years, said. "If approved, it would take things back to where they were before the nationalisation of Iraq's oil in 1972." But he said the situation would be reversed when Iraqis regained their "true sovereignty".
Salman said: "If there is something that should be worked on, it is the [Iraqi] constitution. "The constitution contains serious gaps in terms of who is in charge of the oil and its revenues ... [despite the] oil in Iraq being under every Iraqi river, desert, marsh and farm." The new law, if approved, would authorise production share agreements (PSAs), which offer huge profits for foreign oil companies.
PSAs are normally ideal for poorer countries exploring virgin lands or wanting to extract oil from fields where the resource is well below the surface and are designed to protect investors from the risks involved in such exploration projects. But Iraqi oil experts say investors face virtually no risk, as the country's oil is the cheapest to extract worldwide, and is of such a high quality that it sells at a premium on world markets.
Issam al-Chalabi, Iraq's former oil minister, said PSAs were completely inappropriate for Iraq. He said: "An oil barrel in most of Iraq’s oilfields costs between 50 cents and one dollar to extract. Iraq's fields are also proven, and investing in them is risk-free. "These kinds of agreements are normally given when there is a risk, as the case in Sudan, Yemen and several other countries, where companies invest money with great risk that they would not find oil, or they find difficult to extract oil."
Al-Chalabi said PSAs were a highly profitable formula for oil companies and in many cases they were granted for "political reasons". "Iraq's PSA with the Chinese and Russians gave a profit percentage less than 10 per cent when the oil barrel price was around $25, but now the barrel is over $60 which means the percentage of 12.5 per cent is too high," he said.
Dhafir al-Ani, an Iraqi member of parliament, said: "The proposed oil law is the best possible in the current situation. "However, if there are some gaps in it, then the reason is the constitution, which contains several controversial issues and needs to reconsidered." Al-Ani agreed with Salman that the proposed law was a "political" deal to strengthen US allies in Iraq.
Labels: Dhafir al-Ani, draft oil law, Iraq, Issam al-Chalabi, production share agreements, PSAs, Ramzy Salman, U.S.
