U.S. Oil Companies Stand Pat in Mideast
By Grant McCool
Sun Apr 7, 9:52 AM ET
NEW YORK (Reuters) - Major U.S. oil companies, accustomed to war zones and post-Sept. 11 security levels, took a business-as-usual stance last week when Israeli-Palestinian violence stoked fears of a wider war in the oil-rich Middle East.
Long hardened to operations in some of the world's toughest neighborhoods, oil firms took a sanguine view of the threat that the Israeli-Palestinian conflict could spread in the region that holds 66 percent of the world's oil reserves.
"This industry has often found itself in the middle of civil conflicts, conflicts between other countries and we just do the best we can under the circumstances," said spokesman Tom Cirigliano of Irving, Texas-based Exxon Mobil Corp., the world's largest oil company.
"As far as any action we're taking, it's pretty much at the current time business as usual," Cirigliano said. Exxon Mobil has operations in Abu Dhabi, Qatar and Yemen.
U.S. oil operations in the Middle East are limited as unilateral sanctions ban investment in Iran and Libya, the U.N. embargo keeps all firms out of Iraq, while both Saudi Arabia and Kuwait ban foreign oil production. Neither Israel nor the Palestinians export any oil.
Historically, oil companies feel more threatened in turbulent Latin American producers such as Colombia, where businessmen have been kidnapped and pipelines sabotaged, and Ecuador than the Middle East, said analyst Fadel Gheit of Fahnestock & Co. in New York.
PAYING THE PRICE
The combination of intensifying Israeli-Palestinian violence -- and the fear that Washington will ultimately extend its war on terrorism to Iraq -- has added a $5-$6 "war premium" to crude oil prices, according to analysts.
U.S. consumers are already paying much more at the gasoline pump than they were just a month ago. The average retail price rose 2.9 cents per gallon to $1.37 cents last week and it has risen 22.7 cents per gallon in the past four weeks, according to the U.S. Department of Energy (news - web sites).
Crude oil futures on the New York Mercantile Exchange have dropped in the last two days from more than $28 a barrel to $26 after President Bush (news - web sites) on Thursday signaled a more active diplomatic role for Washington in ending the Israeli-Palestinian fighting.
Representatives of three U.S. oil companies, Exxon Mobil Corp. , ChevronTexaco Corp. , and Occidental Petroleum Corp. , all of whom have operations in the Gulf, said there was no change in security already tightened after the Sept. 11 hijacked plane attacks on America.
The industry does face the threat of sabotage against oil fields and refineries in countries such as Saudi Arabia and Yemen, known to have members of the Al Qaeda network targeted by the U.S. in its war on terrorism, Gheit said.
"If you get people who are so possessed, a guy could take his lunch box in a knapsack and go blow up an entire facility and become one of the biggest heroes in the Middle East," he said. Such an attack was "a very low probability, but doable," he added.
Other analysts said only a strike on Israel by a country sympathizing with the Palestinians or a U.S. military role would raise the alarms of U.S. companies in the Middle East.
"The big worry in the industry is the conflict spreading in such a way that it invites retaliation or a bigger U.S. role," said Sarah Emerson of Boston's Energy Security Analysis.
The industry has also taken a skeptical view of a call by Iraq -- and on Friday echoed by Iran -- for a repeat of the 1973 Arab oil embargo which choked supplies to the United States and other Western countries for supporting Israel and sent the global economy spinning into recession.
Influential members of the Organization of Petroleum Exporting Countries (OPEC (news - web sites)) have dismissed the idea, and analysts say the embargo threat is more rhetoric than reality.
"Those who work in the oil patch deal with this day in and day out. When Iraq talks about using an oil weapon, we roll our eyes," said Emerson.
San Francisco, California-based ChevronTexaco, which has a limited operation in Israel and exploration and production in Saudi Arabia, Kuwait, Bahrain and Qatar, said it was monitoring developments.
"Ultimately, our planning is on long-term cycles, but of course we are watching very closely the events that are unfolding there," said spokeswoman Ayana McIntosh.
Los Angeles-based Occidental Petroleum spokesman Larry Meriage, whose company has a skeletal staff in Yemen and producing operations in Oman and Qatar, said, "You deal with political risk on a daily basis."
Barry Borak, managing director at Massachusetts-based investment firm David L. Babson & Co., Inc., said there was more risk in Yemen than six months ago.
But he added that oil companies are not quick to sever ties when political volatility strikes. "There's always somebody in line behind them," Borak said. |
