Friday, April 18, 2008

On oil development, Iraq is acting like an adult

Iraq’s oil ministry is inviting foreign oil companies to help develop Iraq’s hydrocarbon resources. This story from yesterday’s Washington Post explains:

Iraq, which pre-qualified international oil companies this week for the bidding, will open the southern fields of Rumaila North, Rumaila South, West Qurna and Zubair for exploration, Oil Minister Hussain al-Shahristani said in an interview in Brussels yesterday. In the north, international oil companies will be invited to develop the Kirkuk oil field and the Akkaz gas field.

[…]

Iraq pre-qualified 35 of 120 U.S., European and Asian companies that submitted documents between Jan. 9 and Feb. 18 to participate in the licensing round, Oil Ministry spokesman Asim Jihad said Monday.

Exxon Mobil, the world's largest oil company, and Europe's two biggest, Royal Dutch Shell and BP, were among the 35, as were ConocoPhillips, Chevron and Total. Others included Russia's Gazprom, the world's largest natural-gas producer, and Lukoil, the Russian oil producer with the most overseas assets. Mitsubishi and Inpex Holding of Japan and China's Sinochem were also accepted.

Iraq’s policy of soliciting cooperation from foreign oil companies contrasts sharply with the self-destructive policies of many other countries. Mexico, Iran, Venezuela, Russia, and others either prohibit or have driven away foreign development expertise. Ideological orthodoxy or simple bureaucratic greed in these countries will soon correlate with declining output. High crude oil prices (caused in part by the self-inflicted production constraints in these countries) won’t help them much when their exports suffer rapid declines.

Mr. al-Shahristani seems determined to prevent Iraq from falling into this trap. Future increases in Iraqi output won’t do much by themselves to stabilize the global oil market. But these increases will certainly benefit Iraq’s treasury. And as I explained last month, this development will give all Iraqis, including the Sunni-Arabs, something to live for, and an incentive to cooperate with each other.

3 Comments:

Blogger Doug said...

Iraqi Army Seizes Basra From Militia as Cleric Threatens New Uprising
An operation to rout Moktada al-Sadr’s militia intensified, while Mr. Sadr threatened to declare “war until liberation” if the crackdown did not cease.

8:21 PM  
Blogger Tim Newman said...

Absolutely correct. By far the best approach for any country sitting on oil and gas reserves is twofold:

1. Auction off licenses to develop blocks.
2. Tax production.

Anything else, especially nationalising the industry, is inefficient and unsafe.

10:17 PM  
Anonymous Anonymous said...

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7:40 AM  

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