|
|
 |
|
| World Marketplace |
Shifting Economic Sands
By Jean-Francois Seznec
04/01/2004
|
Black Gold
Despite this hazardous political and economic terrain, foreign companies will find a country with a great deal of economic
potential, largely from oil, the only reliable source of wealth and certainly
Iraq’s only natural advantage. If it can attract $3 billion to $5 billion in
capital, Iraq will be able to increase its oil production from the current
output of about 2.3 million barrels a day to its 1980 production level of 3.5
million barrels a day. Only 15 of a total of 73 oilfields in the country are
actively exploited, and with an additional $10 billion to $20 billion in
capital, Iraq could develop the untapped fields and boost production to 6
million barrels a day. This would allow it to export about 5.5 million barrels a
day, making it the world’s second-largest source of oil, after Saudi Arabia.
| Desperately short on capital and lacking a credit rating, Iraq has no
choice but to seek foreign direct investment to recharge its economy. |
Before the occupation, Iraq’s Ministry of Oil had signed memorandums of
understanding (MOUs) with a number of foreign companies to develop more of its
oil fields. France’s TotalFinaElf had agreed to develop the Majnoon field, one
of the largest and most underused in the world. Lukoil of Russia was allocated
the West Qurna field, and other smaller deals were signed with Chinese and
Malaysian companies. The work never started because of the sanctions by the
United Nations.
All these agreements were based on a production sharing
arrangement whereby the international oil companies (IOCs) agreed to invest and
develop the fields in return for 90 percent of the production for six years.
They agreed to transfer ownership back to Iraq in the two or three years that
followed. The IOCs also received a guaranteed return on the initial investment,
all their expenses paid out of the Iraqi share of production, and favorable
terms in business arrangements after the full handover of the
production.
|
|
|
|
|
|
|
