BP may leave Iraq

Things aren’t going so well for some of the major oil companies in Iraq. The CEO of British Petroleum (BP) has stated flatly that his company has no future there.

John Browne, a favorite of British Prime Minister Tony Blair, as much as said he has given up on Iraq because of the violence and instability in that country, which has worsened in recent weeks.

A mere 18 months ago, Browne was very enthusiastic about the outlook for oil and profits and was busily lobbying Washington and London to ensure BP would get its share of the goodies. But that’s not the case today.

“We need a government, we need laws, and we need decisions,” Browne said. “We have not got any of that yet. A whole range of steps need to be taken.” He made the comment as he announced record profits this past week.

Browne also cast strong doubt on U.S. plans for rebuilding Iraq. “It’s not obvious to me you need foreign oil companies to do that [redevelopment],” he said. He claimed private oil companies could cause destabilization of an already touchy situation and that it perhaps should be left to state-owned local groups to carry out rehabilitation of the country.

That rather dark view of Iraq’s future came just hours after Browne met the prime minister at the launch of a new climate change group. The decidedly downbeat message is in sharp contrast to the optimism he expressed in 2002, when Browne was concerned that U.S. firms would monopolize Iraqi oil and other resources after Saddam was ousted.

“We have let it be known that the thing we would like to make sure, if Iraq changes regime,” said Browne at the time, “is that there should be a level playing field.”

Originally, Western oil companies had hoped for a bonanza as Iraq, with the second largest oil reserves on the planet, ramped up its production. But that has not happened to any great degree, and those objectives have vanished as hopes for peace after the American-British invasion have faded into violent and ferocious guerrilla assaults on the joint forces.

Bruce Evers, who is an analyst with Invest Securities, said the future of Iraq depended on foreign oil companies such as BP rejuvenating the country’s only real export income source.

“Iraq could not begin to get itself back on its feet without the Western oil companies,” he said. “It needs their technology, expertise and balance sheets [cash], apart from anything [else].”

Evers said the Iraqi oil fields were so dilapidated and the surface equipment so old, it was “a miracle that anything functioned at all.”

Although Halliburton and other big energy firms won the major contracts to boost the oil industry to prewar levels, it was oil majors, like BP, that drilled the wells and pumped out the oil, Evers said.

A meeting of the International Energy Agency (IEA), after a meeting with OPEC to examine future investment worldwide, pointed up the threat to President Bush and Prime Minister Blair.

The executive director of the IEA, Claude Mandil, stated: “A pivotal area in shaping the flow of investment to oil developments is the Middle East. Although the costs of developing the region’s reserves are lower than anywhere else in the world, financing this investment will be determined partially by perceptions of security.”

Mandil said private international oil companies—including BP—can command “large cash resources” that state companies can not always muster because they are limited by demands on the national budget.

BP and some other big foreign oil companies are growing more and more wary of the Mideast, focusing instead on investing in Russia, or Angola or the Caspian.

“Oil companies have become increasingly frustrated by the attitude of many Middle East rulers such as Saudi Arabia, who do not seem to be able to decide whether they want us to operate there or not,” said one oil man who asked not to be identified.

Energy experts also have stressed the importance of Western cash for transforming the oil industry and national wealth of Kazakhstan. Addressing a joint U.K.-Russian seminar in Aberdeen, Gerard Young of Ernst & Young accountants, said oil and gas investment in Kazakhstan could be worth $150 billion by 2015.

Young said it has only been since the collapse of the Soviet Union and the subsequent availability of foreign capital and expertise that Kazakhstan has begun to realize the value of its large natural energy resources.

Iraq’s redevelopment, on the other hand, has been hampered by widespread opposition to the occupation and to service companies working in that country. Iraqi militants have targeted these workers, and many contractors have pulled their labor forces out of the country, causing work on a number of infrastructure projects to stop.

Source: The Guardian

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