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To: X Y Zebra who wrote (33370)	3/19/2003 5:23:22 PM
From: X Y Zebra	Respond to of 57110

Iraqi Oil, Before and After a Possible War The potential is huge Iraq holds greater oil reserves (112.5 billion barrels) than any nation in the world except Saudi Arabia. Despite that promise, Iraq has not fully developed its oilfields or introduced the modern technologies common to most producing nations. And the oil it does produce is limited because it has not complied with requirements established by the United Nations after the 1991 Gulf War. As a result, Iraq is currently incapable of becoming a major supplier of energy worldwide. The longer-term possibilities are enormous. But Iraq must establish a politically stable and secure environment before it can attract the investments needed for the successful exploration and development of its oilfields. U.S. oil industry and Iraq Historically, U.S. and British oil companies played a major role in developing Iraqi oil. But after the country nationalized its oilfields in the mid 1970s, they withdrew. More recently, China, France, Japan and Russia have negotiated contracts to develop oilfields in Iraq. Which companies or countries would have access to oil in a postwar Iraq is unknown. We are unaware of any current relationship between U.S. oil companies and the government of Saddam Hussein. It would be pointless to speculate on whether a future Iraqi government would be interested in inviting U.S. companies to develop the country's oilfields. How much oil does Iraq produce? U.S. companies do not currently drill for oil in Iraq, but they are nonetheless major purchasers of Iraqi crude sold under the UN Oil for Food program. Iraq officially exported about 1.2 million barrels a day through late 2002 and about 449,000 barrels of that came to the United States. That constitutes about 37 percent of total Iraqi exports, but less than 3 percent of total U.S. consumption. That compares with 9.8 percent and 1.9 million barrels a day from Canada, the biggest oil exporter to the U.S. If Iraqi exports were shut off, other producing nations, mainly members of OPEC, would likely make up the difference. Saudi Arabia, for example, could produce an additional 2 to 2.5 million barrels of oil a day. Have the sanctions worked? The UN sanctions against Iraq imposed by western nations after the Gulf War were intended to prevent Saddam Hussein from using his country's oil wealth to rebuild the Iraqi military and expand his power in the Arab world. They were later modified by the UN to permit oil sales for humanitarian purposes. Saddam also raised additional money by smuggling some oil outside UN auspices. To the extent that Saddam has been prevented from going to war again, the sanctions have worked. According to the Bush Administration, however, the sanctions have not prevented Iraq from producing weapons of mass destruction that threaten other nations. What will be the role for U.S. oil companies in post-war Iraq? API does not know whether U.S. oil companies will seek access to Iraqi oil if there is war or a change in government in Baghdad. Oil companies are constantly evaluating opportunities for developing new fields all over the world and a part of the evaluation always focuses on the political stability in the nations containing reserves. Whether U.S. companies could operate successfully and profitably in a post-Saddam Iraq is simply unknown. There are also other competing and potentially lucrative undeveloped oilfields in the world, including those in Russia, Kazakhstan and Azerbaijan where U.S. companies are already exploring. The Bush Administration did say publicly that leaders of the Iraqi opposition were interested in meeting with various U.S. companies and organizations. API made oil companies aware of the notice, but we don't know which, if any, of them took part in these meetings. What are the obstacles to developing Iraqi oilfields? A postwar Iraq will probably want to rehabilitate its oil industry as quickly as possible. The country needs revenue badly for many reasons so expanding its productive capacity should be a high priority. Saddam's government announced plans several years ago to expand production to 6 million barrels daily. Obviously that hasn't happened. Once the UN sanctions are lifted, Iraq will almost certainly begin seeking the investments needed to developing its oilfields. According to the James Baker Institute for Public Policy at Rice University, it would take $5 billion to install the new technologies that would restore Iraqi oil production to pre-1990 levels. Another oil analyst, Daniel Yergin says it would take $7 billion and three years to restore Iraq's peak production in 1980 of 3.5 million barrels daily reached before the Iraq-Iran war. Persuading companies and countries that it is safe to invest and operate in Iraqi will be a major goal of any new government in Baghdad. Updated: 01.16.03 apiinformation.org