Big US budget cuts begin as both sides trade blame
Big US budget cuts begin as both sides trade blame
The still-fragile US economy braced itself for the gradual but potentially grave impact of the across-the-board cuts, which took effect Friday night at the stroke of Obama's pen. Hours earlier, he and congressional leaders emerged from a White House meeting no closer to an agreement.
Even as Democrats and Republicans pledged a renewed effort to retroactively undo the spending cuts, both parties said the blame rests squarely on the other for any damage the cuts might inflict. There were no indications that either side was wavering from entrenched positions that for weeks had prevented progress on a deal to find a way out: Republicans refusing any deal with more tax revenue and Democrats snubbing any deal without it.
"None of this is necessary," Obama said in his weekly radio and Internet address Saturday. "It's happening because Republicans in Congress chose this outcome over closing a single wasteful tax loophole that helps reduce the deficit."
The president said the cuts would cause "a ripple effect across the economy" that would worsen the longer they stay in place, eventually costing more than 750,000 jobs and disrupting the lives of middle-class families.
But the Senate's Republican leader said yesterday that the automatic spending cuts that just started to kick in are modest and a step toward curing Washington of its "spending addiction."
Sen. Mitch McConnell said on CNN's "State of the Union" on the across-the-board cuts are not as devastating as some predicted. The Kentucky Republican also said families have had to trim their budgets and can appreciate Washington's step to curb spending.
Obama and the Republicans have been fighting over federal spending since the opposition party regained control of the House of Representatives in the 2010 midterm elections. The budget cuts were designed in 2011 to be so ruthless that both sides would be forced to find a better deal, but they haven't despite two years to find a compromise.
The $ 85 billion in cuts apply to the remainder of the 2013 fiscal year, which ends Sept. 30. But without a deal they will continue slashing government spending by about $ 1 trillion more over a 10-year period.
The immediate impact of the spending cuts on the public was uncertain.
Exxon faces setback in Iraq as oil and water mix
- Exxon’s talks with Iraq on water project hit problems
- Losing the contract could deal a blow to Exxon’s broader Iraqi plans
LONDON: Talks between Exxon Mobil and Iraq on a multibillion-dollar infrastructure contract have reached an impasse, Iraqi officials and two industry sources said, in a potential setback to the oil major’s ambitions to expand in the country.
More than two years of negotiations on awarding the US firm a project to build a water treatment facility and related pipelines needed to boost Iraq’s oil production capacity have hit difficulties because the two sides differ on contract terms and costs, the officials and sources told Reuters.
Unless the differences can be resolved, the project could be awarded to another company in a tender, the officials said, without elaborating on the points of dispute.
Losing the contract could deal a blow to Exxon’s broader Iraqi plans, as it would be handed rights to develop at least two southern oilfields — Nahr Bin Umar and Artawi — as part of the deal.
Exxon declined to comment.
Further delays to the project could also hold back the oil industry in Iraq, OPEC’s second-largest producer; the country needs to inject water into its wells or risk losing pressure and face severe decline rates, especially at its mature oilfields. As freshwater is a scarce resource in Iraq, using treated seawater is one of the best alternatives.
The Common Seawater Supply Project (CSSP), which would supply water to more than six southern oilfields, including Exxon’s existing West Qurna 1 field and BP’s Rumaila, was initially planned to be completed in 2013 but has now been delayed until 2022.
“The CSSP would be expensive and challenging but there’s opportunity here (for Exxon) ... to get access to resources on a very large scale and to achieve something and really make a difference to its own business,” said Ian Thom, principal analyst at consultancy Wood Mackenzie.
Many of the world’s biggest oil companies, such as BP, Total, Royal Dutch Shell and Eni, have operations in Iraq, where a low-return environment and strict contract terms have squeezed returns in recent years.
With total oil production at West Qurna 1 at around 430,000 bpd, Exxon’s presence in Iraq is small compared with dominant player BP whose Rumaila oilfield accounts for around a third of the country’s total production of about 4.4 million bpd.
While the Texas-based firm is looking to grow in Iraq, its geographical focus remains on the Americas, including US shale fields and Brazil, in contrast to rivals such as France’s Total and Italy’s Eni who have been significantly expanding their activities in the Middle East in recent years.
The talks between Iraqi authorities and Exxon are still ongoing, according to the industry sources and officials from the Iraqi oil ministry.
However the state-run Basra Oil Company (BOC), which is overseeing the project, said it could now tender the project this month in a parallel process with the aim of completing a first phase by 2022.
“We have this one approach but we can have another approach as well,” Abdul Mahdi Al-Ameedi, head of the Iraqi oil ministry’s licensing and contracts office, told Reuters.
Iraq chose Exxon to coordinate the initial studies of the CSSP in 2010. At the time, Baghdad aimed to raise its oil production capacity to 12 million barrels per day (bpd) by 2018, rivalling Saudi Arabia. That target has been missed and been cut to 6.5 million bpd by 2022 from around 5 million bpd now.
Negotiations with Exxon fell through in 2012 due to red tape and cost disputes. In 2015, the company re-entered talks with the oil ministry, this time in partnership with China’s CNPC and with the CSSP folded into a much bigger development project known as the Integrated South Project.
CNPC did not reply to a request for comment.
For Iraq, going down the non-Exxon route raises two major concerns: How to integrate the project between the water treatment facility and the oilfields and how to finance the project, Thom said.
Two Iraqi oil sources told Reuters that taking the non-Exxon path would raise financing concerns for Iraq.
Projected costs of the scheme have not been disclosed, but engineering studies have put the cost of treating 12.5 million bpd of seawater transported to six oilfields at $12 billion.
The capacity has been revised downwards, with the first phase set to have a 5 million bpd of water, and in the second phase an additional 2.5 million bpd of water will be added for additional fields.