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OPEC interests a possible war
casualty
By Humberto Marquez
CARACAS - United States-based oil companies will
get the lion's share of the petroleum business in Iraq
once the war there is over, undermining the interests of
OPEC (Organization of Petroleum Exporting Countries),
say oil industry experts, who also warn that an end to
the war will not immediately translate into abundant
supplies of inexpensive crude.
"There is no
doubt that the military occupation of such an important
oil exporting country, with a nationalist government, is
creating cracks in OPEC and affecting the mid- and
long-term interests of its other members, like
Venezuela," says Víctor Poleo, a professor of graduate
studies in oil economics at the Central University
(UCV), in Caracas.
After the war "there will be
a substantial increase in Iraqi oil production, and I
wouldn't be surprised if schemes emerged to weaken, if
not destroy, OPEC", said Humberto Calderon, a former
Venezuelan minister of energy and of foreign relations,
in a conversation with Inter Press Service.
The
US has been trying for some time to reduce its
dependence on oil supplies from the Persian Gulf region,
home to the dominant members of OPEC, an 11-country
cartel comprising Algeria, Indonesia, Iran, Iraq,
Kuwait, Libya, Nigeria, Qatar, Saudi Arabia, the United
Arab Emirates and Venezuela.
That was the aim of
the controversial energy plan that George W Bush brought
with him to the US government, in which he has sought to
expand oil exploration and exploitation within his
country's own territory, even in the protected natural
areas of Alaska.
But control of Iraqi oil wealth
could turn into alleviation for US oil worries and a key
to reducing prices - and to wielding influence over
OPEC. However, not all experts believe that after the
war it will be easy for petroleum investments in Iraq to
flourish.
"It would be a mistake to assume that
immediately after the US occupation there would come a
prolonged period of political stability in Iraq and
surrounding areas," warns another graduate professor at
UCV, Mahzar al-Shereidah, an Iraqi-Venezuelan. The
"stability factor", al-Shereidah told IPS, "is
fundamental for the materialization of oil industry
projects".
"The big oil companies are very aware
of the rich subsoil in Iraq, but an occupying regime
creates additional risks to dealing with political,
ideological, cultural and religious factors. And the
corporations are going to take that into account," he
added.
Iraqi territory holds 112 billion barrels
of petroleum in proven reserves, the second largest
volume within OPEC, after Saudi Arabia's 260 billion
barrels. And Iraq's crude is relatively easy to extract
from the ground. Each oil well represents major output
because production costs are just US$2 per 159-liter
barrel. Because it is light, sweet crude it is easily
refined and has little sulfur or metal residue.
But "the extreme cruelty of this invasion, which
has affected entire peoples, awakens deep sensitivities
in a nation that is proud of resisting the conquerors.
We are going to witness the allotment of war booty and
the United States will take the lion's share - but it
will not be effortless," al-Shereidah commented.
According to former oil minister Calderon, Iraq
could double its output of 2.4 million barrels daily
within a short time. Prior to the war, total production
was limited through the "oil for food" program, overseen
by the United Nations in the context of the embargo
imposed against Baghdad for invading neighboring Kuwait
in 1990.
As Iraq's role as a supplier increases,
"the OPEC countries will be elbowing each other out of
the way" to win markets, pushing prices down, Calderon
predicts.
Fadhil Chalabi, an Iraqi national and
former OPEC secretary general, goes even further. He
believes his country could even double its proven
reserves through intense oil exploration, becoming a
"super-giant producer", like Saudi Arabia, putting as
much as 10 million barrels on the international market
each day.
In addition to its oil output
potential, Iraq has geographic advantages that reduce
the cost of reaching global markets. Its petroleum can
be shipped via its port on the Persian Gulf and, to
bypass the vulnerability of the Straits of Hormuz
between the Gulf and the Arabian Sea, through the
pipelines connecting Iraqi oil fields to the
Mediterranean and Red seas.
Iraq as a
super-giant producer of crude oil managed by US-based
companies would crown the dearest dream of the leaders
of the governing Republican Party: "to bring OPEC to its
knees," forcing the cartel - through competition from
Iraq - to sell its oil at lower prices, says Chalabi.
In the opinion of the former OPEC official, the
depression of prices and the abundance of oil in Iraq
will prompt investors to shift their focus away from
higher-cost areas, like the North Sea, where Britain and
Norway extract oil. They will turn to areas with lower
production costs, precisely those of OPEC and the
Persian Gulf region, he says.
UCV professor
Poleo believes the "US empire will want to hold the keys
to all major oil sources, and that will ultimately
include the Andean-Amazon oil reserves, which extend
from Trinidad-Tobago, through Venezuela, Colombia,
Ecuador, Peru and Bolivia." Venezuela is the fifth
leading OPEC member in terms of conventional crude
reserves, at 77 billion barrels, but it also holds 270
billion barrels of unconventional, extra-heavy and
bituminous crudes.
The 11 OPEC countries have
managed their output during the past two decades to
maintain stability in the average price of the cartel's
"basket" of seven crudes. They consider the optimal
price range for consumer and producer nations alike to
be $22 to $28 a barrel.
OPEC "rejects the notion
of using petroleum as a political weapon", stressed a
former secretary general of the organization, Ali
Rodriguez, current president of Venezuela's state-run
oil firm PDVSA. As such, OPEC has made an effort prior
to and during the war in Iraq to ensure a consistent
supply of oil to its clients in the industrialized
world.
The markets have seen petroleum prices
decline from a mean of $32 per barrel before the war to
fluctuating around $26 a barrel two weeks after the
invasion of Iraq began. The situation kept in step with
the advances of the US-British forces in Iraq, though
OPEC suggested on Tuesday that its members might cut
back production in order to buoy up prices.
Another major factor influencing the oil markets
is the potential for fat profits for the companies
winning contracts for the reconstruction of a country
emerging from years of war and economic embargo.
The Bush administration - which Poleo describes
as "an oil directorate" because of the links between US
officials and energy and aerospace firms - has already
made clear that it will control the reconstruction
contracts, which are estimated to be worth $30 billion
to $100 billion.
US Secretary of State Colin
Powell said Iraqi revenues, particularly those from the
oil industry, would serve as resources for rebuilding
the country. The first companies to win some of these
contracts were International Resources Group, to
coordinate humanitarian aid efforts, Stevedoring
Services of America, to run the Um Qasar petroleum
shipping terminal, and Kellogg Brown & Root, to
control oil wells that have been set on fire. The latter
is a subsidiary of Halliburton, a major petroleum
industry construction firm, which until 2000 was headed
by US Vice President Dick Cheney.
For the
exploitation of the Iraqi oil fields, "It is certain
that US and British firms will have priority, and will
try to make up for their absence in Iraq during the 12
years of the embargo, and Baghdad to back down from
partnership contracts with oil companies from China,
France and Russia," said al-Shereidah.
Firms
from the three countries signed letters of intent for
oil development that would require investments of more
than $40 billion. The big question now is to what extent
those contracts will be respected in the allocations of
post-war Iraq.
As far as the Iraq National Oil
Company, the government enterprise that managed the
petroleum industry until now, "it is very possible that
it will remain, though it might be partially privatized
to facilitate the distribution of percentages the United
States will collect for the costs of the war and those
earmarked for expenses and investment in Iraq," said
al-Shereidah.
(Inter Press Service)
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