HOUSTON: The Western oil giants negotiating service deals to help Iraq boost its crude production are surely hopeful the relationships will lead to greater access to the country’s massive oil fields, industry experts say.
It’s unclear, however, whether the leverage the companies gain by providing technical support to Iraq over the next couple of years will lead to a greater role tapping Iraq’s vast reservoirs.
Iraq’s Oil Ministry said Thursday the country is close to signing oil-service deals with several major oil companies — the first major Iraqi contracts with big Western companies since the 2003 US-led invasion. The pending deals, once signed, would be something of a stopgap to help Iraq begin to increase production until the country is able to approve a new national oil law.
But they also could mark the beginning of an important long-term toehold by Western companies into Iraq’s potentially lucrative oil industry, giving the companies a bidding advantage over others in the future.
The relationships would be established at a time when international oil companies are finding it harder and more expensive to gain access to new sources of hydrocarbons. State-run oil companies, like those in Saudi Arabia and Venezuela, control almost 90 percent of global oil reserves and, given today’s historic prices, are keeping a tight grip on their assets.
Fadel Gheit, an analyst at Oppenheimer & Co. in New York, said he has no doubt the oil companies said to be involved in negotiations — BP, Chevron, ExxonMobil and Royal Dutch Shell, among them — are eyeing possible production-sharing agreements with Iraq as the country’s oil business evolves. “There’s no question in my mind that’s the case,” Gheit said. “These companies are in it for the money, not to make friends.”
Iain Brown, an analyst with research and consulting firm Wood Mackenzie who keeps tabs on the Middle East, said it’s pretty clear the idea for now is to hire the companies to help Iraq get more oil flowing by providing technical support and other expertise.
Once that happens, in fields that don’t require sophisticated production methods, there would be little incentive for Iraq to strike production-sharing agreements, or PSAs, Brown said.
