U.S. Companies Shut Out as Iraq Auctions Its Oil Fields

Those who claim that the U.S. invaded Iraq in 2003 to get control of the country’s giant oil reserves will be left scratching their heads by the results of last weekend’s auction of Iraqi oil contracts: Not a single U.S. company secured a deal in the auction of contracts that will shape the Iraqi oil industry for the next couple of decades. Two of the most lucrative of the multi-billion-dollar oil contracts went to two countries which bitterly opposed the U.S. invasion — Russia and China — while even Total Oil of France, which led the charge to deny international approval for the war at the U.N. Security Council in 2003, won a bigger stake than the Americans in the most recent auction.
“[The distribution of oil contracts] certainly answers the theory that the war was for the benefit of big U.S. oil interests,” says Alex Munton, Middle East oil analyst for the energy consultancy Wood Mackenzie, whose clients include major U.S. companies. “That has not been demonstrated by what has happened this week.”

In one of the biggest auctions held anywhere in the 150-year history of the oil industry, executives from across the world flew into Baghdad on Dec. 11 for a two-day, red-carpet ceremony at the Oil Ministry, broadcast live in Iraq. With U.S. military helicopters hovering overhead to help ward off a possible insurgent attack, Oil Minister Hussein Al-Shahrastani unsealed envelopes from each company, stating how much oil it would produce, and what it was willing to accept in payment from Iraq’s government. Rather than giving foreign oil companies control over Iraqi reserves, as the U.S. had hoped to do with the Oil Law it failed to get the Iraqi parliament to pass, the oil companies were awarded service contracts lasting 20 years for seven of the 10 oil fields on offer — the oil will remain the property of the Iraqi state, and the foreign companies will pump it for a fixed price per barrel.

The auction represents an astonishing transformation for Iraq. In just a few months, it has become a major oil power with the potential to overtake the world’s biggest producer, Saudi Arabia. In a previous bid round last June, Iraq handed control to the giant Rumaila field near Basra to Britain’s BP, while ExxonMobil later took an 80% stake in another huge field, West Qurna Phase 1, and plan to eventually pump 2.5 million barrels a day. Now, Baghdad officials say they aim to harness the know-how and technology of their foreign partners to pump about 12 million barrels a day by 2017. “It is difficult for any major oil company not to be in Iraq,” Total’s global exploration and production chief Yves-Louis Darricarr