August 18, 2022

In Rebuilding Iraq’s Oil Industry, U.S. Subcontractors Hold Sway

It seemed a geopolitical victory for Lukoil. And because only one of the 11 fields that the Iraqis auctioned off  went to an American oil company — Exxon Mobil — it also seemed as if few petroleum benefits would flow to the country that took the lead role in the war, the United States.

The auction’s outcome helped defuse criticism in the Arab world that the United States had invaded Iraq for its oil. “No one, even the United States, can steal the oil,” the Iraqi government spokesman, Ali al-Dabbagh, said at the time.

But American companies can, apparently, drill for the oil.

In fact, American drilling companies stand to make tens of billions of dollars from the new petroleum activity in Iraq long before any of the oil producers start seeing any returns on their investments.

Lukoil and many of the other international oil companies that won fields in the auction are now subcontracting mostly with the four largely American oil services companies that are global leaders in their field: Halliburton, Baker Hughes, Weatherford International and Schlumberger. Those four have won the largest portion of the subcontracts to drill for oil, build wells and refurbish old equipment.

“Iraq is a huge opportunity for contractors,” Alex Munton, a Middle East analyst for Wood Mackenzie, a research and consulting firm based in Edinburgh, said by telephone.

Mr. Munton estimated that about half of the $150 billion the international majors are expected to invest at Iraqi oil fields over the next decade would go to drilling subcontractors — most of it to the big four operators, which all have ties to the Texas oil industry.

Halliburton and Baker Hughes are based in Houston, as is the drilling unit of Schlumberger, which is based in Paris. Weatherford, though now incorporated in Switzerland, was founded in Texas and still has big operations there.

Michael Klare, professor of peace and world security studies at Hampshire College and an authority on oil and conflict, said that American oil services companies were generally dominant both in the Middle East and globally because of their advanced drilling technology. So it is no surprise, he said, they came out on top in Iraq, too — whatever the initial diplomatic appearances.

United States officials have said that American experts who advised the Iraqi oil ministry about ways to restore and increase petroleum production did so without seeking any preferences for American companies.

And immediately after the 2009 auction round won by Lukoil, the United States Embassy spokesman in Baghdad, Philip Frayne, told Reuters that “the results of the bid round should lay to rest the old canard that the U.S. intervened in Iraq to secure Iraqi oil for American companies.”

But Professor Klare said that the American officials who had advised the Iraqi government on its contracting decisions almost certainly expected American oil services companies to win a good portion of the business there, regardless who won the primary contracts.

“There’s no question that they would assume as much,” he said.

The American oil services companies, which have been in Iraq for years on contract with the United States occupation authorities and military, are expanding their presence even as the American military prepares to pull out.

For example, Halliburton, once led by former Vice President Dick Cheney, has 600 employees in Iraq today and said in a statement that it intended to hire several hundred more before the end of the year. “We continue to win significant contracts in Iraq, and are investing heavily in our infrastructure,” Halliburton said.

The 11 contracts Iraq signed with oil majors, including the six for the largest fields, are intended to raise Iraqi output from about 2.5 million barrels of oil a day now to 12 million barrels daily in 2017. Some of the oil services contracts are for repairing currently productive fields, others to tap mostly unused sites.

Article source: http://feeds.nytimes.com/click.phdo?i=a6c26fae0a077809f9ebda7eb64b507e

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