Iraqi Oil: Temptation versus Risk

Business Materials 5 September 2008 10:46 (UTC +04:00)
Iraqi Oil: Temptation versus Risk

Azerbaijan, Baku, 4 September / Trend corr. A.Badalova/ Production and export of Iraqi oil still remain attractive for foreign companies in spite of undetermined political situation in the country, western experts said to Trend .

"Other foreign companies are quite interested in investing in oil in Iraq.  It is under-explored and under-produced," Mary Ann Tetreault, Professor of International Affairs at Trinity University in San Antonio, Texas, told Trend via e-mail on 4 September.

According to Tetreault, Iraq needs a lot of energy for itself but if it sells more oil it would be able to afford to do research on solar and also put in wind generators to satisfy some of this demand, leaving a lot to sell abroad. 

Expert of U.S. Energy Securities Analysis (ESAI) Andrew Reed said consumer countries are most interested in investing in oil production in Iran.

"Oil companies from major consumer countries like China are most interested in participating in oil production in Iraq. This is a good way to procure future supply to their countries instead of to competing consumer countries," Reed said to Trend via e-mail on 4 September.

Chinese National Oil Corporation (CNPC) signed an agreement with Baghdad in the sum of $3bln to develop Al-Ahdab oil field in Wassit province. The agreement on oil production was signed in 1997 but then frozen. Initially, the deal sum was $700mln.

Tetreault said the problems are security, sanctions, and questions about renewed conflicts between outside powers that could spill over into its energy policy.  

"The Chinese have imperatives that make them willing to take such risks.  Other companies may have other imperatives that make Iraq attractive in spite of the drawbacks," said Tetreault. According to her, the big established companies probably would like to wait until Kirkuk is resolved and maybe also for another election and government to see how things are working out. 

" Iraq could provide security but no one can make guarantees - that's what insurance is for," Tetreault said. Kirkuk is connected with Turkey's Ceyhan port by a pipe capable of pumping 1bln barrels per day. In pre-war period about 700,000 barrels per day were produced in Kirkuk. During latest United States' operation in Iraq and during post-war period the pipe was operating with long frequent breaks due to often terrorism attacks.

Tetreault said the problem is that Iraq is not finished with the struggle over who won the country or how it should be shaped and administered.

"Iraq has made great strides getting rid of outside terrorists but we have no idea about the degree and range of sedimentation of criminal organizations, both national and transnational, and whether the people controlling the government now are prepared to share power or not. So investors are threatened with getting into the cross fire between contending groups and also between criminals and police should the government decide to crack down on crime rather than cashing in on it," she said.

E.Tariverdiyeva contributed in the article.

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