- DUBAI (Reuters) - They controlled
Iraqi oil flows until Baghdad showed them the door 30 years ago. Now the
Western multinationals are longing for a second shot at Iraq's vast untapped
oilfields when the country is free of U.N. sanctions.
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- Whether sanctions are removed by a U.S.-led war on Baghdad
or United Nations weapons inspections, the world's top oil companies are
hungry for access to Iraq's 112 billion barrels of reserves, second only
to Saudi Arabia.
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- But bitter experience with Western majors has made Iraqi
executives wary of foreign influence in its oil sector, the lifeblood of
its national economy.
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- "Nobody will take Iraq for a ride again," said
a veteran Iraqi oil industry source. "Do foreign oil companies expect
to be given production-sharing contracts after their governments use aggression
on us? We want to do things ourselves."
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- That strong sense of self-reliance already has inspired
Iraqi officials to rebuild their industry from the ashes of the 1991 Gulf
War while under 12 years of U.N. sanctions.
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- Although admiring Iraq's resourcefulness, Western oilmen
hope to see a radical change in its go-it-alone mentality when and if the
country finally opens up.
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- "We've always been up against a high degree of nationalism
in Iraq. But reality must now be faced," said a top Western oil executive
working in the Middle East. "Iraq is on its knees and needs the international
oil companies for their technology, cash and management."
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- Several billion dollars and cutting-edge Western technology
are required just to boost Iraqi capacity by one million barrels per day
(bpd) from its three million bpd mark.
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- BITTER LEGACY
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- Many Iraqis still bear a grudge after British, American
and French oil companies controlled their oil industry for half a century
through the Iraq Petroleum Co (IPC).
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- It was an era when Western majors working in the Middle
East used oil output and prices as an economic and political tool, analysts
said.
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- From the time it struck oil at the huge Kirkuk field
in 1927 until nationalism forced it out in 1972, IPC -- made up of BP,
Exxon, Mobil, Shell, CFP (Total) and Partex -- ruled the roost.
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- That did not sit well with Baghdad, which resented IPC's
control over its revenues.
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- And Baghdad felt cheated when IPC invested heavily in
neighbouring Iran and Saudi Arabia, at the expense of Iraq where output
stagnated.
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- "BP and other companies felt Iraq was not a stable
state where their investment would be protected in the long term,"
said Mustafa Alani, a London-based Iraqi analyst.
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- "The idea was to keep investment at a minimum in
Iraq and build up Saudi Arabia, Iran and other Gulf countries where they
believed prospects for political stability were higher."
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- Fed up with what Baghdad saw as IPC's lack of drive,
Iraq revoked 99.5 percent of the company's territory in the early 1960s.
Relations between the two sides deteriorated further.
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- The net result was that after nearly 50 years in Iraq,
IPC left the country pumping 1.7 million bpd in the early 1970s.
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- Less than a decade later, and under its own steam, Iraq
hiked capacity to 3.8 million bpd. In this short time Iraq found the prized
Majnoon, West Qurna, Bin Umar and Halfaya oilfields.
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- EXPLOITING POTENTIAL
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- Those were the heady days of Iraqi oil. By contrast,
the last two decades have seen war and sanctions battering its infrastructure
and preventing development of many huge finds.
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- But mindful of its untapped wealth, Iraq under President
Saddam Hussein has planned for the day it can reach six million bpd by
drawing up a $20 billion development scheme which features 11 prime oilfields
and assumes foreign involvement.
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- Deals in principle have been agreed with firms from countries
showing political support -- Russia, China and France. But some analysts
say Iraq uses such agreements primarily as a means to punish the United
States and bust sanctions.
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- Indeed, frustration with Russia and China for failing
to start work on West Qurna and al-Ahdab, respectively, has left Baghdad
threatening to rip up the deals.
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- Iraq's investment gameplan could change completely if
sanctions are lifted or the United States succeeds in ousting Saddam for
his alleged weapons of mass destruction.
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- But even the most open-minded, Western-leaning Iraqi
technocrats are likely to drive a hard bargain.
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- "Iraqi oil officials do not see themselves as backward
or disadvantaged and having to give away the store," said Amy Jaffe,
President of AMJ Energy Consulting in Houston.
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- "But if the government feels desperate for investment,
terms would have to be commercial to get deals done quickly."
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