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Russian Companies “Turn” to Iraq
Lukoil and Gazprom, Russia’s two largest energy companies, were among them. Lukoil bid with Statoil (Norway’s oil company) and won one of the largest oil regions of Iraq, West Kurna, and its 12.9 billion barrels of oil reserves. As we know, Lukoil had already agreed to do oil operations in Iraq before the Iraq war; however, their agreement was later cancelled. Now, the consortium will earn 1.15 dollars per barrel in a field that will produce 1.8 million barrels a day. Plans estimate that 15 thousand people will be employed to exploit the West Kurna 2 oil reserves.
The other Russian energy giant, Gazprom, won its bid for the Bedra oil region, which is situated 160 kilometers southeast of Baghdad, with the Turkish oil company, TPAO, and the South Korean oil company, Korea Gas, and Malaysia’s Petronas. 109 million barrels of oil reserves have been located in this region. The consortium will produce 80 thousand barrels of oil a day, earning $5.50 per barrel. These firms will make more money from their oil reserves due to the more severe and unsafe conditions in the region. Compared to other regions, foreigners were less interested in the Bedra oil region. No one even made a bid on the East Bahgdad oil reserves because of the instability caused by the region’s radical Shiites. However, this region has one of the largest oil reserves in the nation (8.1 billion barrels).
Iraq is expected to increase its daily production to 12 million barrels over the next 6 years. Iraq is also unique since it is the only OPEC member nation whose oil production is not restricted by the cartel. Therefore, Iraq will continue its oil production regardless of improvements in energy field and regardless of price fluctuations in energy sources. The rapid rise of Iraq in the energy sector will diminish Russian and Saudi Arabian supremacy in the energy field. We need to indicate the relationship between these bids and Iraqi Foreign Minister Hoshyar Zebari’s words, “Iraq will soon reattain regional power status.” The main trump card Bahgdad’s in hand is its energy resources, and these energy resources can reinstate Iraq as a regional power. Iraqi officials know this very well and are playing this trump card without hesitation. The important feature of these bids is that the agreements are to be based on “service labor.” Therefore, the foreign companies that win their bids will be paid in oil, Iraq’s government will use the rest of the oil however they see fit. Despite this, foreign companies are very interested in Iraq’s oil reserves. Oil surveys in Iraq will not only profit foreign companies, but also give them the opportunity to learn about the geophysics of the region. This will affect decisions about investing or not investing in the other parts of region.
After lengthy negotiations the Russians achieved their goal. Russian officials were annoyed with Iraq since Iraq had cancelled its prior agreement with Lukoil and Russia had made huge efforts to sign that contract. Moscow even wiped out Iraq’s 10 billion dollar debt to win its oil reserves in the region.
One thing we notice is the fact that the companies that won bids are mostly from Europe and Asia, and American companies lost out. American companies are probably planning to file larger bids and are waiting for the right time. Iraq’s minister of energy, Hussein al-Shahristani, has said that his nation’s largest oil reserves will be opened for bidding at a later date. Thus these bids coming six years after the beginning of the Iraq war will definitely be a major boon to the economic and political power of Iraq. The projects in question will also increase investment in the region and bring Iraq back into the international arena.
* Dr. İlyas Kamalov, ORSAM Eurasia Political Advisor
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