Global Investing

Will western oil companies win big in Iraq?

July 23, 2008

Industry analysts and executives are sceptical a planned opening of the war-torn country’s oil industry to foreign investment will bring big profits for the Western Oil Majors, or boost output as much as hoped.

While many have lined up to register to bid for Iraqi oil deals, actual bidders may be thinner on the ground and deals may take longer to conclude than the government plans.

John Mitchell, an energy specialist at the Royal Institute of International Affairs said recent rises in Iraqi production to around 2.3 million barrels per day were largely due to the improving security situation. If Iraq wants to make big jumps from here on, it will need to invest a lot of money in, and apply a lot of technology to, its oilfields.

A delay on the involvement of foreign oil companies could make it harder for Iraq to meet its ambitious output growth targets.

“If the invasion was about oil, let the record show it has been more botched than even its toughest critics claim. Iraqi oil production went into steep decline after the war, and has only recovered to Saddam-era levels on a consistent basis this year,” Raad Alkadiri, Senior Director in the Markets and Country Strategies practice, at industry consultants PFC Energy said in a note to clients.

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New interview with Joseph Stiglitz on the oil industry harm caused by sanctions. Bc

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