motivatiOns for mILitary action?

[Amy Sommer <a.sommer@mail.utexas.edu>]

This article in the New York Times seems to exemplify all the concerns 
expressed about the Bush administration's true motivation for military action 
in Iraq:  new oil reserves for American companies.  Although companies are 
trying to keep discussion on this topic to a dull roar, it is now out in the 
open that they not only hope, but expect this to become a reality.  

Seeing as how the Bush administration and ExxonMobil are so closely financially 
linked (Exxon donated generously to Bush's campaign) it is hard to believe that 
Bush himself doesn't have something at stake here...besides the upcoming 
elections, that is.

-Amy Sommer


Energy Companies Weigh Their Possible Future in Iraq
By NEELA BANERJEE


hough Iraq's future is hazy, energy companies have begun to weigh the roles 
they might play in the revival of the country's huge but dilapidated oil 
industry. According to a report by Deutsche Bank, oil field services companies 
like Schlumberger Ltd. and the Halliburton Corporation could be the early 
winners, but the prospects for oil companies themselves are less clear. 

"We expect to see oil service contracts to rehabilitate old fields, but 
anticipate long-drawn-out negotiations on new fields," the report says. 

Industry experts and the State Department have said that oil revenues will 
probably finance the rebuilding of Iraq, which has reserves second only to 
Saudi Arabia's. That would make repair of the industry a priority either for a 
new regime or for Saddam Hussein's government, if it satisfies United Nations 
weapons inspectors and the sanctions on Iraq end.

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"People talk like we're going to invade, the government is going to fall and 
Exxon Mobil is going to get a contract right afterward, and it's a lot more 
complicated than that," said Amy Myers Jaffe, senior energy adviser at the 
James A. Baker III Institute for Public Policy at Rice University. "The repair 
of oil export facilities and the prioritization of which facilities will get 
rebuilt first are the building blocks for Iraq to re-establish its production 
capacity."

Western energy companies have demurred from discussing the business 
possibilities in a post-Hussein Iraq, concerned that such talk would reinforce 
Baghdad's contention that the current conflict is driven by oil. But while 
industry experts say that such planning is not a top priority at oil and gas 
companies, the companies are beginning to explore the prospects Iraq might 
hold. 

"It's very clear that if there is a return of Western oil companies to Iraq, 
clearly companies like Schlumberger will benefit," said Christian Lange, 
director of investor relations for the company, which is based in New 
York. "Everybody is looking at what the situation in Iraq may be and how they 
may individually benefit from what may happen, and we're not unique in that 
regard."

Deutsche Bank emphasized that its report was not a recommendation to buy shares 
of companies that might someday enter Iraq. "The report is a way of saying, 
`Watch this space,' " said Adam Sieminski, senior oil strategist with Deutsche 
Bank and an author of the report, "and the oil service work could be near."

The report, based on information from American government agencies, the United 
Nations and industry sources, points out that the Persian Gulf war and the 
subsequent years of difficulty in getting parts and services under United 
Nations sanctions have left the Iraqi oil industry tattered. Over the course of 
two years, it says, "rehabilitation of under-invested and bombed facilities" 
could add at least one million barrels a day in production. Iraq now produces 
about three million barrels a day.

The cost of reconstruction — and the possible revenues to oil field services 
companies — would be around $1.5 billion, the report stated. 

But when, and whether, those revenues begin to flow remains uncertain, Mr. 
Sieminski said. It could vary immensely, depending on whether Mr. Hussein 
acquiesces to strict weapons inspections, or the United States invades and 
ousts him quickly, or the conflict drags on and does further damage to the oil 
sector.

Once critical export terminals, pipelines and oil fields are repaired, the 
report says, Iraq might consider developing new fields, requiring a total 
investment of about $38 billion.

Over the last several years, Mr. Hussein has signed memorandums of 
understanding with oil companies to develop fields once sanctions are lifted. 
With the United States and Britain most sharply at odds with Mr. Hussein, 
American companies and BP did not participate in the process. Mr. Hussein 
himself favored companies from France, Russia and China — in an effort, Mr. 
Sieminski said, to win friends in the United Nations Security Council.

There is debate in the industry about whether those agreements will be honored 
once sanctions are lifted, Mr. Sieminski said. If Mr. Hussein remains, the 
memorandums would probably remain valid. But if he goes, there would most 
likely be a great deal of jockeying to develop fields that hold billions of 
barrels of oil, industry experts said.

The concern among some of those analysts is that the development of the Iraqi 
oil sector could take the path followed by Kuwait after the Gulf War, when Iraq 
destroyed most of Kuwait's oil facilities.

The hope was that Western oil field services companies would repair the fields 
and the Kuwaitis would then invite big foreign oil companies to help develop 
the country's reserves, Ms. Jaffe said. 

"What happened is nothing," she said. The oil field services concerns came but 
the oil companies were kept out, she said, "because Kuwait had a professional 
oil industry and a Parliament that voted not to let foreign oil companies in."

"It seems like that could happen in Iraq, too, because it will be a sovereign 
country," she said.