Of Iraqi Oil, The Maliki "Surge", Iraqi Reconstruction, and

[Fern]

Managing Iraq's Econoccupation

Al Gehad Analysis of proposed Law (Never Passed)

IRAQ: Forbidden fields: Oil groups circle the prize of Iraq's vast reserves

I see members here are of the belief Iraq has completed oil legislation wildly favorable to the US and detrimental to own interests. I also people compalining about a lack of reconstruction in Iraq and why aren't we putting Iraqis to work?. Then we have a thread about the purpose and success of Maliki's recent "surge" in Southern Iraq.

Might be that all these are somewhat inter-related.

First the Oil Legislation has NOT been passed. From what I can tell the "sharing part" is not the problem. The draft agreements so far allocate the oil revenues among the Kurdish, Sunnis and Shia based on polulation. Part of what brought down the coalition needed to pass the oil legislation was the Kurds independantly starting oil development contracts in their area. I.e., who has the power to negotiate the deal?

Another problem is whether to go with PSA's or service contracts with the outside/foreign oil companies. The PSA's appear to have been unfairly characterized as a blatant take-over of Iraq's oil industry by the US (actually there are many different countries in negotiations, not just US companies). The other option is Service Contracts. But depending upon the details, these are very close to PSA's yet may provide the veneer as casting the structure as an Iraqi nationized oil industry. The latter seems preferred by the population. But these agreements with foreign oi companies bring (arguably?) much needed investment funds and expertise.

The Iraqi's have only 27 of 80 discovered fields under production. And much more in oil reserves is expected to be discovered in Iraq, possible enough so that it could surpass Saudi Arabia as having the largest amount of oil reserves. But the oil companies can't come in for exploration etc until the security improves. And this means the security in the South. The Bahgdad area has no oil, security is OK in the Kurdish region.

As far as reconstruction efforts go, the USA has to-date invested about $28 Billion and put about 100,000 Iraqi's to work on reconstruction projects. The Iraqi gov has budgeted $18 billion, yet spent little. Moreover, they have huge cash reserves - $30 billion alone in US banks (according to Carl levin in today's meeting with Patraeus & Crocker). Why are they holding back?

So, I'm left wondering if Maliki's surge in Souther Iraq isn't perhaps just as much about moving oil production forward as showing political strength. Taking control of the Southern section will help encourage the participation of foreign companies/investment/exploration. And that will help him (enormously) politically in the upcoming elections. Looks to me like all the players excepting the parliment are very involved in the oil issue now and making progress. Will progress in the security area put pressure on the parliment to proceed? Until the Southern security issue is resolved, legislation can't really help. Put that piece (security) in place and the major holdup will be in their laps (legislation).

Are the Iraqi's being stingy with their own reconstruction efforts in an effort to horde funds for oil exploration and development/production? Generally the model has been for developing countries to rely on foreign investment to establish their oil industry. Seems sometime thereafter they nationalize the thing and kick-out the foreigners. Iraq is already in the driver's seat, merely because there are very new places for the foreign oil co's to go. Can Iraq get an even better deal if they come to the table with a chunk of money, thus not really needing that of the foreign companies? Would this help reach a concensus of all (Iraqi) parties and help get the legislation finally passed?

Things could be moving quicker than we're led to believe, and much of it might be under the radar screen. If Iraq were open the spigots on their own oil money things may change drastically in a very short period of time.

Fern

(Below are excerpts from the links above0

Friday 04 April 2008

As violence rises again in Iraq, negotiations to institutionalize US economic dominance continue unabated.

While the battle of Basra raged last week, a series of talks between the Bush administration and the US-backed Maliki government rolled forward. These negotiations may have at least as many implications for Iraq's future as the violence on the ground.

The discussions, ongoing since November, stem from a "Declaration of Principles" agreement signed by the two leaders, aimed at establishing a long-term "friendship" between their countries.

While the portion of the Declaration that suggests a permanent US military presence in Iraq has garnered much attention, the agreement also proposes another goal: to solidify "economic ties" between the two countries and grant the US preferential treatment in trading with Iraq.

As brought to light by last week's oil price surge during the assault on Basra, economic concerns are inextricably linked to the occupation. When it comes to oil, the coming months may be crucial in determining what kind of "friends" the US and Iraq are going to be over the long haul.

A Framework for Occupation

In a House Foreign Affairs Committee hearing last month, State Department Iraq Coordinator David Satterfield revealed the Declaration of Principles proposals have now been divided into a binding Status of Forces Agreement (on military involvement) and a nonbinding Strategic Framework Agreement (on economic and diplomatic relations). Neither would be submitted for the consent of Congress. Though Satterfield emphasized that, being nonbinding, the Strategic Framework would not "tie the hands" of future administrations, it could solidify changes the US has already made to Iraq's economic landscape - and pave the way for increased US control over Iraq's oil in years to come, according to Antonia Juhasz, a fellow at Oil Change International.

"A lot of frameworks for foreign investment were set up under [former Director of Iraq Reconstruction L. Paul] Bremer, and are already in place," Juhasz told Truthout. "A bilateral agreement would lock all that in and also place pressure on the government to pass the domestic oil law, to settle access for foreign companies to Iraq's oil underground."

The "all that" encompasses a host of sweeping reforms: Thanks to Bremer's alterations of Iraqi law during the first year of the US occupation, American companies are now allowed to buy out 100 percent of Iraqi businesses, instead of partnering with them. Bremer's orders also eliminated Iraq's high taxes on corporations, exchanging them for a 15 percent "flat tax." They abolished the practice of giving preference to Iraqi companies - in contracting out reconstruction work, for example - and erased a requirement to hire Iraqi workers.

Where the Oil Flows

The November version of the Bush-Maliki agreement suggested a commitment to "facilitating and encouraging the flow of foreign investments to Iraq, especially American investments, to contribute to the reconstruction and rebuilding of Iraq."

According to James A. Paul, executive director of the Global Policy Forum, the "flow of foreign investments to Iraq" wouldn't manifest as generously as it sounds: The deal would primarily translate into "US/UK oil company control."

Last week's assault on Basra was "part of an effort to defeat the 'nationalists' in Iraq and consolidate a pro-US political regime that will go ahead with the oil deals," Paul told Truthout.
Just before fighting erupted in Basra, the Iraqi presidential council approved the "provincial law," which clears the way for elections - potentially allowing nationalist leaders who oppose US oil interests to come to power. Maliki's Basra attack, says Paul, represents a failed attempt to quash that possibility.

It's not a question of pressure from oil companies, according to Reese Erlich, co-author of "Target Iraq: What the News Media Didn't Tell You." Buying up oil reserves is a strategic move to ensure US energy "security." The corporations become the vehicles for that security.

"It's not like oil companies were pounding on the state house door to invade Iraq," Erlich told Truthout. "Oil companies certainly benefit, but they're not the initiators."


Since the early days of the occupation, the US has never kept its oil execs far from Iraq's oil. The oil fields, as well as the Oil Ministry in Baghdad, were some of the only places American soldiers guarded throughout the initial invasion. Paul notes that US "advisers" presided over the drafting of the latest version of the oil law.

Skirting the Law

According to the pan-Arab newspaper Al-Hayat, simultaneous with the battle of Basra, negotiations were taking place between major oil companies and the Iraqi ministry of oil.

An Oil Ministry official told The Associated Press last week Chevron, Exxon and British Petroleum would soon submit proposals for contracts on specific oil fields - including the Rumaila field near Basra.

Since the oil law has not yet passed, private companies can't obtain long-term contracts on the fields. However, that hasn't stopped them from getting their feet in the door. All it takes is a few powerful, cooperative Iraqis, and, according to Erlich, some of the most prominent are Kurds, who control Iraq's historically highest-producing oil field, near Kirkuk. Disregarding the Parliament's objections, Kurdistan has signed numerous "production sharing agreements" with Western oil companies.

The Maliki administration has also done its share of dodging Parliament's prohibition on international oil investment. Long-term contracts may be off limits, but short-term contracts stop just short of illegal, and Iraq's executive branch is swooping in on that loophole.

"You have the oil minister trying to sign two-year contracts with the oil companies, to demonstrate that the Maliki government is working with oil companies, even if Parliament is not," Juhasz said.

Pushing Back

Parliament is holding its ground. For the past year, the body has systematically rejected drafts of the oil law, which, in any form, would divest the legislature of authority on oil. The 12 fields still controlled by the government would be in the hands of an advisory board, including members of the Maliki administration, representatives of the provinces - and even, probably, representatives of foreign oil companies, according to Juhasz.
Paul points to Parliament's seeming inaction as a genuine act of resistance to the occupation.

"The Parliament has remained steadfastly opposed and, in spite of periodic predictions that parliamentary agreement is 'near,' they have not acted," he said. "There have even been rumors that the companies have offered $5 million to each parliamentarian who votes 'yes,' a rumor that seems to me to be probably based in reality, yet even with such blandishments the Parliament has not acted."

By democratic standards, Parliament has some important backers on its side. A July poll commissioned by a group of human rights organizations showed 63 percent of the Iraqi people would prefer Iraqi companies maintain control of the country's oil.

Neither Democratic presidential hopeful has explicitly spoken out against opening Iraq up to foreign oil investments. Both Barack Obama and Hillary Clinton have emphasized the need to urge the Iraqi government to pass one prong of the oil law - a provision to distribute oil revenue evenly throughout the country, over which there is little controversy - but have largely bypassed the broader debate about the law.

According to the oil ministry, only 27 out of 80 discovered fields are producing in Iraq, the result of decades of under-investment. A report by Wood Mackenzie, the consultancy, meanwhile says the scale of Iraq's remaining oil resources surpasses allother countries in the Middle East, including Saudi Arabia, and its high-quality reservoirs ensure that production costs would be very low.

But Iraq is also a dangerous frontier. Companies invited to invest in its oil industry - and satisfy Baghdad's plans at least to double oil production from the current 2.5m barrels a day - will be walking into a political, security and legislative minefield. Their involvement threatens to exacerbate the sectarian tensions that have torn the country apart since the US-led invasion.

International oil companies acknowledge that security, although better over the past year, will still need to improve significantly before workers are dispatched to Iraq. The weakness of the central government and its patchy control over the southern part of the country, home to 80 per cent of proved oil reserves, will also be taken into account. Perhaps most important, however, is that they could be entering a country with deep political fissures and lingering anger at foreign intervention, without clear legislation allowing for foreign participation.

In Libya, another country whose oil industry has only just opened up to foreign participation after years of sanctions, the government has now increased its take from all oil projects to an average of 95 per cent, from 81 per cent in 2000. Even in Kurdistan, where the regional authority has signed production-sharing agreements, the government's take of future oil produced is estimated at 87 per cent, says Mr Fryklund.

Oil industry executives say their companies will not invest if they do not get a significant part of "the upside", industry jargon for expected increases in production. But Tariq Shafiq, a former director of Iraq's national oil company, says companies would be prepared to accept variations of service contracts that pay companies fixed returns rather than rewarding them with control over reserves.

In theory, the production sharing contracts (and similar ones) are the perfect system for oil relations. The State is in full control of the oil. Foreign companies produce oil according to specific contract terms. Practically speaking, the state?s work and supervision is so limited in this type of contracts.

In Abu Dhabi, September 10, 2006, Deputy Premier and Chairman of the oil law committee Barham Salih was quoted as saying, ?Personally, I am in favour of the production sharing agreements. We have to ensure a maximum increase in profits and revenues for the Iraqi people.? Thomas Wald of the University of Dundee describes these contracts as, ?an appropriate marriage, they tend to give governments political satisfaction and the foreign company business satisfaction. The government is portrayed as if it is running the show. The company could run the show too through the legal phrase that refers to the emphasis on maintaining national sovereignty. Caution must be heeded when it comes to the oil law. Explicit contracts must be confirmed in order to preserve our rights. The regional law proved successful in this regard.

According to this type, the foreign company provides the funds needed for the first step, the investigation processes, and for the next step, the drilling operations and completing the basic structure for a ready-to-produce-and-export oil field. The company?s money is refunded by allocating a share of the first oil production, known as Cost Oil.

Once the company has its money back, the remaining oil is called Profit Oil, which is divided between the state and the company. Typically, taxes are imposed on the company?s shares of profit oil. The company also pays a Royalty for the produced oil. They could also pay other bonuses set by the contract. Sometimes the state contributes to the company?s capital and becomes part of the consortium, which is contracting with the state.


All the contracts that were signed in the 1990s stipulate that the company receives 40-100 percent of cost oil for refund, whereas the state receives 60-92 percent of profit oil. Of course those percentages must always be altered in a way that could be for the good of the state, particularly after 2004, when oil prices skyrocketed so much that such percentages look too generous. For instance, the company takes 30 percent of profit oil, the state 70. When the revenues are worth $20 per barrel, the companies get 6 USD/barrel. When a barrel is worth $50 (production cost almost fixed) the companies receive 15 USD/barrel instead of the $6, i.e. double and a half more thanks to the increase in oil prices. Therefore, an article that stipulates reconsidering these contracts after a specific period of time (4-5 years for example) must be added. The current contracts do not include articles about profit oil sharing (profits). Rather they tend to speak of the Internal Rate of Return. According to past international contracts, the state contributed to 10-50 percent of the companies? capital.

In Iraq, it could be quite beneficial to sign production sharing agreements for the small uncovered fields or lands that have not been subjected to oil inspections, once the contract forms are carefully studied. We hope Barham Salih?s comments were meant to refer to such fields or some of those which are being operated on in Kurdistan. He is not referring to the large fields like Majnoon, Gurna or eastern Baghdad.

According to the information we have, the Regional Government of Kurdistan has signed four production sharing agreements. In April 2003, they signed off contracts with the Turkish company Petoil, in January 2004 with Turkish Genial Energy, June 2004 Norwegian DNO and June 2005 Canadian Western Oilslands.

Technical Service Contracts come in different shapes. They have been developed to meet the financial requirements or need pertaining to experience or certain political or economic conditions. They look almost like method C below (i.e., PSA's explained above).

First/ Risk Service Contracts
According to this type, the foreign company provides funds to invest in the development operation. When production is in full swing, the company is paid back for the money it provided earlier plus a fixed pay for every barrel that comes out of the production line. This way, the company could increase profits by increasing the production. Meanwhile, the company must bear the risks of failure, particularly when prior investigations are not conducted. This method was used in Algeria when it first started producing. It works fine on the uncovered fields.

Second/ Buyback Contracts
This contract type was developed by Iran in the 1990s to upgrade a number of oil fields. Such contracts are similar to the Risk Service type above but they have shorter durations, which could last from three to five production years after two to three years of development. By the end of the duration, the national oil company is handed over the field and keeps all the revenues. Foreign companies are paid in oil barrels not in cash, which could be calculated according to the investment percentage the company had offered. A percentage of the revenues must be ensured after agreeing on reaching specific production rates that are written in the contract. The company here too bears the risks in case the production does not reach the rates agreed upon.

Ambassador Ryan Crocker, the top U.S. diplomat in Iraq, in testimony (.pdf) this morning before the Senate Armed Services committee, heralded increased Iraqi investment in its own reconstruction, noting $18 billion in pending budget allocations by the government in Baghdad and assuring lawmakers that "the era of U.S. funded major infrastructure projects is over." This would surely be welcome news to committee chairman Carl Levin, Democrat of Michigan, if only he could bring himself to believe it.

American taxpayers are spending vast sums on reconstruction efforts. For example, the U.S. has spent at least $27.6 billion to date on major infrastructure projects, job training, education and training and equipping of the Iraqi Security Forces. On the other hand, according to the Special Inspector General for Iraq Reconstruction, the Iraqi Government budgeted $6.2 billion for its capital budget in 2006 but spent less than a quarter of it. As of August 31, 2007, the Iraqi Government had spent somewhere between 4.4 percent (according to the GAO) and 24 percent (according to the White House) of its $10.1 billion capital budget for 2007. As of last Thursday, the U.S. government is paying the salaries of almost 100,000 Iraqis who are working on reconstruction.

 

[Lemon law]

Thanks for the links Fern.

 

[Fern]

:thumbsup:

 

[cliftonite]

Does this mean we can leave soon? Or can they pay for some of our expenses?

 

[Fern]

Originally posted by: cliftonite
Does this mean we can leave soon? Or can they pay for some of our expenses?

IDK about leaving real soon. Maliki or somebody has to consolidate power and get oil production online.

They've got a ton of oil from the looks of it. At more than a $100 a barrel, they're loaded.

I think everybody's working on getting that going. But all the MSM reports on is IEDs etc.

If they do get the oil & money flowing, we'll test that theory that terrorism springs from poverty etc.

I'd like to see some reporting/analysis about the allocation infrastructure. The oil money is supposed to be spread out on a per capita basis. How that money really flows, who controls it and what it gets spent on is a big question to my mind.

Fern

 

[Lemon law]

A zillion questions and speculations are in those links I am just starting to read. But reading some of the not long dated links, I note the analysis of various contractual type options is mumbling about the calculus changing between $20/barrel oil and $50/barrel oil.

But the main question is why a higher priority is not given to getting Iraqi oil onto world markets long before yesterday.

In my mind, much of the problems in Iraq could be addressed by rebuilding infrastructure and economic development. And the money to pay for that and more is just
sitting, just waiting to be pumped out.

 

[orangat]

Originally posted by: Fern
Managing Iraq's Econoccupation

Al Gehad Analysis of proposed Law (Never Passed)

IRAQ: Forbidden fields: Oil groups circle the prize of Iraq's vast reserves
.......
.......
First the Oil Legislation has NOT been passed. From what I can tell the "sharing part" is not the problem. The draft agreements so far allocate the oil revenues among the Kurdish, Sunnis and Shia based on polulation. Part of what brought down the coalition needed to pass the oil legislation was the Kurds independantly starting oil development contracts in their area. I.e., who has the power to negotiate the deal?

Another problem is whether to go with PSA's or service contracts with the outside/foreign oil companies. The PSA's appear to have been unfairly characterized as a blatant take-over of Iraq's oil industry by the US (actually there are many different countries in negotiations, not just US companies). The other option is Service Contracts. But depending upon the details, these are very close to PSA's yet may provide the veneer as casting the structure as an Iraqi nationized oil industry. The latter seems preferred by the population. But these agreements with foreign oi companies bring (arguably?) much needed investment funds and expertise.
........

Good links.

http://www.globalpolicy.org/se...05/crudedesigns.htm#A1
The article says the drawbacks which can outweight the benefits :-
1. the investor?s profits are effectively guaranteed, by denying the state a fair share of revenue until the specified profit has been achieved;
2. while the specified level of profits is assured, this does not preclude the investor from obtaining much higher profits (at the more normal, lower share of profit oil);
3. it is in the investor?s interests to inflate costs (a process known as ?gold-plating?), especially if they can sub-contract operations to another company in the same group (for example, from one Shell subsidiary to another Shell subsidiary) ? as the subcontractor profits from their work, the project operator still profits according to the PSA, and the state gets little or nothing.

And reading the Al Ghad link whch you posted, He thinks expanding production by massive foreign investment and rationing output is contradictory and contrary to Iraqi interests by messing with prices and racking up debt (section 5-2). He is also seems opposed to PSA by talking about alternative type deals with China to avoid US meddling. Its unfair for the Iraqi govt not to have first dibs and other preferences in any new uncovered fields and instead allow foreign firms equal access in the draft law. So even if PSA in Iraq was written with all proper language and was the fairest in the world, there are problems with PSA in the Iraqi context

Al Ghad also talks about the Federal Council for Oil and Gas which has total control over the oil industry and this council is outside the purview of the parliament which effectively removes issues on oil from democratic controls.

 

[Lemon law]

As I go onto google to check the distribution of these oil fields, even my initially naive assumptions are only partially borne out. But there is some validity that the bulk of current oil is in the Iraqi South that is almost all Shia and in the North where the Kurds dominate. Leaving the Sunnis in the middle somewhat left out. But closer examination shows the only really existing oil field devoid region is a small swath South of Baghdad. And in terms of the unexplored regions, almost everything
in the West of the country is almost totally un surveyed with modern seismic technology. But that is public map data, what the various companies know may be a different story.

 

[Fern]

Originally posted by: Lemon law
But the main question is why a higher priority is not given to getting Iraqi oil onto world markets long before yesterday.
From what I understand, until the security situation is resolved in the South and the parliment approves the oil legislation, the only thing that's gonna happen is "talk".

In my mind, much of the problems in Iraq could be addressed by rebuilding infrastructure and economic development. And the money to pay for that and more is just
sitting, just waiting to be pumped out.
I'm thinking the exact same thing.

 

[Fern]

Originally posted by: orangat
Good links.

http://www.globalpolicy.org/se...05/crudedesigns.htm#A1
The article says the drawbacks which can outweight the benefits :-
1. the investor?s profits are effectively guaranteed, by denying the state a fair share of revenue until the specified profit has been achieved;
PSA's are very flexible. Some countries are receiving upwards of 90% of the revenue under theirs. The ones I've heard allow the oil company to first recoup their invest before the profit sharing kicks in. That seems fair to me.

I once had a client who was an independant oil producer. The guy was fantastic at idenitfying good exploration sites. He had about a 70% success rate. He had a fleet of helicopters and would fly over South America exploring. He used a similar deal with banks, they'd fund the project and take all the profit until the loan had been repaid. Seems to me back then it would take less than a year for them to be paid off.

2. while the specified level of profits is assured, this does not preclude the investor from obtaining much higher profits (at the more normal, lower share of profit oil);
I wouldn't do a deal with specifed profit, just a percentage of revenue or production. Iraq shouldn't bear all the risk and they're in a position to insist that they don't.


3. it is in the investor?s interests to inflate costs (a process known as ?gold-plating?), especially if they can sub-contract operations to another company in the same group (for example, from one Shell subsidiary to another Shell subsidiary) ? as the subcontractor profits from their work, the project operator still profits according to the PSA, and the state gets little or nothing.

And reading the Al Ghad link whch you posted, He thinks expanding production by massive foreign investment and rationing output is contradictory and contrary to Iraqi interests by messing with prices and racking up debt (section 5-2). He is also seems opposed to PSA by talking about alternative type deals with China to avoid US meddling. Its unfair for the Iraqi govt not to have first dibs and other preferences in any new uncovered fields and instead allow foreign firms equal access in the draft law. So even if PSA in Iraq was written with all proper language and was the fairest in the world, there are problems with PSA in the Iraqi context
I think any of the methods he discuses can work very well, it's just the details. One big problem I think is in the current (but unapproved) PSA agreements is that Iraq can't control production. I.e., how much oil is produced. That's a poor situation to place themselves in. For example, if the world's producers decided to cut back to support a higher price, they could make Iraq bear most of that by cutting back their production significantly while everybody gets to maintain their production quota's.

They can not allow that to happen. The government needs a steady source of revenue, they can't let control of that get out of their hands anymore than necessary.

Al Ghad also talks about the Federal Council for Oil and Gas which has total control over the oil industry and this council is outside the purview of the parliament which effectively removes issues on oil from democratic controls.
I don't think parliment can lord over the oil industry and approve every contract etc. No need to politicize the industry.

I suggest it be some kind of quasi-govermental body with representation by all parties (Sunni, Shia & Kurds). Maybe somethinh along the lines of our Federal Reserve.

I don't think foreigners should have official positions on the panel either. If the Iraqi's need the expertise they can hire it.

 

[dmcowen674]

Originally posted by: cliftonite
Does this mean we can leave soon?

Or can they pay for some of our expenses?

No to both.

According to Sean Hannity as he said today we must stay there permanently or Iraq becomes a Cambodia.

He is the voice of God's word so he has to be right.

 

[Lemon law]

Originally posted by: dmcowen674

Originally posted by: cliftonite
Does this mean we can leave soon?

Or can they pay for some of our expenses?

No to both.

According to Sean Hannity as he said today we must stay there permanently or Iraq becomes a Cambodia.

He is the voice of God's word so he has to be right.

---------------------------------------------------------------------------------------------
I think what ole Sean really meant is that we must stay there permanently until Iraq becomes catholic. Or truth be told, until it becomes protestant, evangelical Baptists preferred, Mormons need not apply.

 

[orangat]

Originally posted by: Fern

Originally posted by: orangat
Good links.

http://www.globalpolicy.org/se...05/crudedesigns.htm#A1
The article says the drawbacks which can outweight the benefits :-
1. the investor?s profits are effectively guaranteed, by denying the state a fair share of revenue until the specified profit has been achieved;
PSA's are very flexible. Some countries are receiving upwards of 90% of the revenue under theirs. The ones I've heard allow the oil company to first recoup their invest before the profit sharing kicks in. That seems fair to me.

I once had a client who was an independant oil producer. The guy was fantastic at idenitfying good exploration sites. He had about a 70% success rate. He had a fleet of helicopters and would fly over South America exploring. He used a similar deal with banks, they'd fund the project and take all the profit until the loan had been repaid. Seems to me back then it would take less than a year for them to be paid off.

2. while the specified level of profits is assured, this does not preclude the investor from obtaining much higher profits (at the more normal, lower share of profit oil);
I wouldn't do a deal with specifed profit, just a percentage of revenue or production. Iraq shouldn't bear all the risk and they're in a position to insist that they don't.


3. it is in the investor?s interests to inflate costs (a process known as ?gold-plating?), especially if they can sub-contract operations to another company in the same group (for example, from one Shell subsidiary to another Shell subsidiary) ? as the subcontractor profits from their work, the project operator still profits according to the PSA, and the state gets little or nothing.

And reading the Al Ghad link whch you posted, He thinks expanding production by massive foreign investment and rationing output is contradictory and contrary to Iraqi interests by messing with prices and racking up debt (section 5-2). He is also seems opposed to PSA by talking about alternative type deals with China to avoid US meddling. Its unfair for the Iraqi govt not to have first dibs and other preferences in any new uncovered fields and instead allow foreign firms equal access in the draft law. So even if PSA in Iraq was written with all proper language and was the fairest in the world, there are problems with PSA in the Iraqi context
I think any of the methods he discuses can work very well, it's just the details. One big problem I think is in the current (but unapproved) PSA agreements is that Iraq can't control production. I.e., how much oil is produced. That's a poor situation to place themselves in. For example, if the world's producers decided to cut back to support a higher price, they could make Iraq bear most of that by cutting back their production significantly while everybody gets to maintain their production quota's.

They can not allow that to happen. The government needs a steady source of revenue, they can't let control of that get out of their hands anymore than necessary.

Al Ghad also talks about the Federal Council for Oil and Gas which has total control over the oil industry and this council is outside the purview of the parliament which effectively removes issues on oil from democratic controls.
I don't think parliment can lord over the oil industry and approve every contract etc. No need to politicize the industry.

I suggest it be some kind of quasi-govermental body with representation by all parties (Sunni, Shia & Kurds). Maybe somethinh along the lines of our Federal Reserve.

I don't think foreigners should have official positions on the panel either. If the Iraqi's need the expertise they can hire it.

If PSA can be tweaked to ensure fairness why are Saudi, Iran.. getting away from such contracts?

Service contracts,PSA and what not are tolerated by host countries because they don't have the proper expertise. The fairest system is one where indigenous countries develop their own oil industry and take 100% without sharing profits with foreigners. In the past this sort of attitude would be regarded as ultra-nationalist and a casus belli for an covert action.

 

[EagleKeeper]

Originally posted by: dmcowen674

Originally posted by: cliftonite
Does this mean we can leave soon?

Or can they pay for some of our expenses?

No to both.

According to Sean Hannity as he said today we must stay there permanently or Iraq becomes a Cambodia.

He is the voice of God's word so he has to be right.

Sean is a hot air that makes the other side think he knows what he is talking about.

His purpose is to antagonize the left - apparently he succeeds in doing that very well based on comments.

 

[Fern]

Originally posted by: orangat
If PSA can be tweaked to ensure fairness why are Saudi, Iran.. getting away from such contracts?

Service contracts,PSA and what not are tolerated by host countries because they don't have the proper expertise. The fairest system is one where indigenous countries develop their own oil industry and take 100% without sharing profits with foreigners. In the past this sort of attitude would be regarded as ultra-nationalist and a casus belli for an covert action.

The one major thing PSA's offer is financing. I don't think the Saudi's, and other long time wealthy oil producers, need outside funding or expertise.

If you only need expertise, you can just buy that.

In my inital post I'm suggesting that the Iraqi's have now horded enough cash to self-finance. I think one of the articles mentions an estimated need of about $2.5 billion annually to get going. They've got far more than that banked now. They may not need outside financing, therefor won't need PSA's either.

But they do need expertise, and if they're smart we'll start seeing some of their best students over here in our universities like the Saudi's have been for years.

Fern

 

[craftech]

The draft Iraq Oil Law written by the US for the M govt. pver a year ago was the subject of discussion in most world media. The BBC spent almost a week analysing it. The US media have intentionally kept it out of the news. We are one of the few nations that know nothing about it. The danger...........It might turn off the public to Republicans and their lies about why we are in Iraq. They can't have that. McCain will be the next president. The news media decided that in 2004 while they were re-electing Bush to a second term using a gullible public. A public that:
.. sees nothing wrong with the news headlines being "$400 haircuts, The Reverend Wright and how that might kill Obamas chances at the presidency, Where Hillary Clinton was when Bill was fooling around with Monica, that Al Gore sighs too much and claims he invented the internet so he is a buffoon, how war heros deserve to be president unless they are John Kerry, who you would rather have a beer with, who is supposedly a 'maverick' and a 'straight talker', that the media is supposedly 'liberal' simply through repetition of the falsehood, that Republicans have kept us safe and Democrats can't, that Republicans are the party of fiscal responsibility despite the recession and the national debt, that Osama Bin Laden want's you to vote for John Kerry because Al Qaeda is scared of George Bush, that Al Qaeda may be trying to influence the 2004 elections just like they did in Madrid when after the train bombing the public voted for the liberal, that things are getting better in 2008 in Iraq just like they were in 2004, that Race is a factor in this race because OBama is running despite the polls that say otherwise unless of course Condoleeza Rice decides to run with John McCain then it will be wonderful.........oh gosh a woman AND a black person as they wet themselves all over the networks with joy, that French people are bad because they opposed the Occupation of Iraq and that Kerry would ask France permission to defend ourselves, that Hillary 'voted for the war' when there was never any 'vote to go to war' only an authorization that Bush demanded before he went before the UN, that Bush was brave despite saying 'Boo Hoo the CIA told me a fib about Iraq...their fault not mine', that even after the Reverend Wright 'story' being the most widely covered 'issue' to date in the 2008 campaign according to a recent PEW research study there are STILL people who think Obama is a Muslim, that despite last month's New York Times article being about McCain and his ties to the very lobbyists he claims to be against the media claimed it was about a sex accusations against him and found the Times guilty by the end of the week and John McCain innocent never once discussing the lobbying accusations that were the thrust of the article, a public that believes a true patriot wears a flag pin, that the Clintons were hiding something by not releasing their tax returns while never asking McCain why he hasn't released his, that Edwards was a hypocrite in claiming he was working to help the poor because he himself wasn't destitute while never questioning John McCain's net worth of $40 Million according to Money magazine, that Teresa Heinz Kerry was a wealthy snob ketchup heiress while never questioning the wealthy and politically connected Arizona beer heiress McCain married shortly after leaving his first wife, and just in time to move to Arizona to run for Congress, and last a public that is told that the important issue of the day is Brittany Spears shaved head.

John

 

[orangat]

Originally posted by: Fern
........
The one major thing PSA's offer is financing. I don't think the Saudi's, and other long time wealthy oil producers, need outside funding or expertise.

If you only need expertise, you can just buy that.

In my inital post I'm suggesting that the Iraqi's have now horded enough cash to self-finance. I think one of the articles mentions an estimated need of about $2.5 billion annually to get going. They've got far more than that banked now. They may not need outside financing, therefor won't need PSA's either.

But they do need expertise, and if they're smart we'll start seeing some of their best students over here in our universities like the Saudi's have been for years.

Fern

There is at least one small and a not so small (Vietnam) country who have developed their own oil industry and now compete globally. The premiers have smugly intimated to some ME oil producers by telling them about how their nationalized industries gives better returns than foreign contractors.

 

[Fern]

^ I wouldn't doubt it. No way around it, sharing means taking less than 100%

Fern

 

[Lemon law]

At least IMHO, if Iraqi leadership is smart, they will allow themselves to be ripped off in developing only one new field. And take the lesser money they get from that one, and hire the development work done on the rest. That was the eye popper in the links Fern provided, how little money it takes to get trillion dollar oil fields on line and bringing in the profits. Ten billion here and five billion there sounds like a lot, but its all more than made up in lost future profits, when some foreign oil company gets 10 X or more of those sunk costs later.

 

[Jhhnn]

Heh. It's not about the oil, right?

My favorite part is how the oil co's need a bigger slice of Iraqi revenues than their usual deal because of the security situation, but won't actually do anything until security issues are resolved...

Face it, guys, the Iraqi govt isn't quite tame enough to bend over for this one. Tying the sharing agreement to the production/exploration agreement isn't necessary, if all we want is for Iraqis to share the revenues equitably... Apparently, the Bushistas want a lot more than that...

Anybody else remember threats to exercise the "Salvador Option" in Iraq, to tear the place apart with civil war if Iraqis wouldn't go along with our occupational goals? What better way to accomplish that than to arm and fund a variety of factions, set them on each others' throats, essentially prevent them from coming together prior to agreeing to give us what we want? The Admin is essentially holding our troops hostage in Iraq to meet their goals, why not hold Iraqi oil production and civil order hostage to the same ends?

Having witnessed a variety of ruthless and devious maneuvers by the Admin, what would lead anybody to think that such was beyond their capabilities?

I think it's a possibility that really needs to be considered.

 

[SSSnail]

One thing I want to know, when the fuck are they gonna start using the profits from selling oil to rebuild their own damn country instead of using ours?

 

[craftech]

It is no coincidence that of all the English speaking countries in the world, this is the only one whose news media has never had a discussion about the oil contracts. The reason is simple. It looks bad for Republicans. In fact, that is the reason the news media concentrates on nonsense instead of issues. On nonsense, Republicans win. On issues, they lose. The elections are about the "media created" personalities of our candidates. Hillary Clinton is a "bitch", Barak Obama is "unpatriotic", John McCain is a "straight talker" and a "maverick" and a "war hero" (unlike John Kerry who we were told didn't deserve his medals).

Pavlov anyone?

John

 

[GrGr]

Levin Says Congress Can Force Iraqis to Pay More of War Costs

Bloomberg

By Ken Fireman

April 11 (Bloomberg) -- Senator Carl Levin said that while the Democratic-controlled Congress can't force a change in U.S. President George W. Bush's Iraq policy, it can compel the Iraqis to pay a greater share of the war's costs.

Levin, the chairman of the Armed Services Committee, said Senate Democrats have repeatedly failed to attract enough Republicans to meet a 60-vote requirement to force Bush to pull more troops out of Iraq.

What is now possible is passing legislation requiring Iraq's oil-rich government to increase its funding of reconstruction and troop training, Levin said. Iraq spends about $9 billion a year on security, an amount roughly equal to what the U.S. spends in one month on the conflict.

Raising Iraq's share ``is something we can do,'' said Levin, 73, a Michigan Democrat, in an interview on Bloomberg Television's ``Political Capital with Al Hunt'' to be aired today. ``We have the votes because there are enough Republicans who would join us on this.''

Levin also predicted that a dispute between his state's Democratic Party and national party leaders over Michigan's delegation to the presidential-nominating convention will be resolved ``at least a month'' before Democrats meet in Denver on Aug. 25.

During congressional hearings on Iraq this week, Levin and other lawmakers in both parties repeatedly criticized the Iraqi government for failing to use its oil profits to pay a greater share of war costs -- and the Bush administration for not forcing them to do so.

Dispute Over Funding

In the interview, Levin said both Bush and U.S. Ambassador Ryan Crocker were wrong when they asserted that the U.S. was ending its funding of Iraqi reconstruction projects.

On the same day this week that Crocker made that statement to the armed services panel, Levin said, the Defense Department notified the committee that it was transferring an additional $600 million into reconstruction projects, including 55 new police stations.

``I want them to pay for the reconstruction costs; they ought to pay for the training of their troops,'' Levin said of the Iraqis. He added later: ``American taxpayers are not only paying the $12 billion a month to run the war, we are paying more for Iraqi reconstruction than they are.''

etc.

HAHAHA with "friends" like these who the hell needs enemies.

First invade and occupy then whine about the cost.... lmao.

 

[chucky2]

Originally posted by: Jhhnn
Heh. It's not about the oil, right?

It's solely about oil or is it about affecting change (positive) in that region, which is where the bulk of the worlds oil happens to come from?

My favorite part is how the oil co's need a bigger slice of Iraqi revenues than their usual deal because of the security situation, but won't actually do anything until security issues are resolved...

I would think a reasonable offset would be fair that would decrease as security was consistently maintained and/or Risks disipated. Unless there's some pretty tight zoned security, I don't blame the oil folks for not going in their either. A Ph.D. in oil exploration is not Rambo, it's not going to happen...

Face it, guys, the Iraqi govt isn't quite tame enough to bend over for this one. Tying the sharing agreement to the production/exploration agreement isn't necessary, if all we want is for Iraqis to share the revenues equitably... Apparently, the Bushistas want a lot more than that...

I agree, they should not bend over. Having some part of the sharing agreement is not that out of line given the cost we've invested in Iraq (both human and $$$).

Anybody else remember threats to exercise the "Salvador Option" in Iraq, to tear the place apart with civil war if Iraqis wouldn't go along with our occupational goals?

No.

What better way to accomplish that than to arm and fund a variety of factions, set them on each others' throats, essentially prevent them from coming together prior to agreeing to give us what we want?

Uh, the last I checked we were the ones bringing people together, not playing them off against each other...where exactly do you get this stuff from????

The Admin is essentially holding our troops hostage in Iraq to meet their goals, why not hold Iraqi oil production and civil order hostage to the same ends?

The Admin is doing what an Admin is supposed to be doing, and that's working towards accomplishing US goals in Iraq. If that's US troops staying in Iraq, then that's US troops staying in Iraq. Using phrases like 'hostage' 'to meet their goals' 'civil order hostage' read like sensationalism...it doesn't bolster an argument but detracts from it.

Having witnessed a variety of ruthless and devious maneuvers by the Admin, what would lead anybody to think that such was beyond their capabilities?

I think it's a possibility that really needs to be considered.

With 100's of Billions of $$$ at stake, it's not beyond anyone's capabilities, including Hillary's, Obama's, Edwards, etc. If this isn't locked down by '09, then they'll be pushing to get the max for the US just like any other POTUS...lets keep it real here...

Chuck