7 May 2003
With current efforts in Iraq’s oil sector focusing on near-term repairs and restoration, cooperation between officials from the US and Iraq is proceeding smoothly. But Iraqi oil technocrats appear more skeptical about cooperation with the US on long-term policy, according to soundings by International Oil Daily in Baghdad.
There is already internal debate among Iraqi officials about the correct course for the industry going forward, with some wanting to sort out this stance before a US-appointed advisory committee — which Washington wants to help shape future oil policy — gets established.
Iraqi oil officials appear wary of more radical US ideas for full-scale privatization of the industry. But they appear open to some liberalization, such as privatizing the downstream or negotiating production-sharing contracts for new field developments.
Oil advisors with the US-led Office of Reconstruction and Humanitarian Assistance (ORHA) say their job is to bring the Iraqi oil sector back to its feet — and that this work should be completed within several weeks.
Long-term policy issues, including the possible restructuring and reorganization of Iraq’s oil industry, are being left for the advisory board currently being set up by Washington.
“We’re trying to address the short-term issues around getting refineries up and running, and getting the distribution system of oil products up and running as well. We are an interim team and our job is to give support to the oil ministry,” Gary Vogler, senior oil advisor to ORHA, told International Oil Daily in an interview Tuesday.
“If we can get this thing up in another couple of months, our job would be done,” he added.
One week after he held his first meeting at the oil ministry, Vogler said the two main issues he’s dealing with on daily basis are providing security and technical material to the oil sector.
“We’re constantly identifying physical security needs and trying to address them, including providing security to gas stations or plants,” he said. “The next thing is to identify what technical items, parts, and chemicals are needed. Whatever has not been delivered through normal channels, we’ll supply them through the emergency channels,” he added.
The supply side is being handled by Halliburton subsidiary Kellogg, Brown and Root (KBR), which Vogler said holds the primary contract with the US Army Corps of Engineers to source anything in critical need and supply it as soon as possible. As an example, KBR is currently looking at sourcing within 24 hours a chemical additive, TEL, which the Basrah refinery badly needs.
“The next stage would be doing the total repair of the infrastructure,” Vogler said, adding that this would also be done by KBR.
The oil ministry is currently drawing up an interim plan for the next two to three months setting targets and dates for production and other operations.
“We’re ready to support them with whatever that plan needs support with,” Vogler said.
Vogler is one of three advisors holding daily meetings and discussing logistics with Iraqi oil ministry officials. The others include Muhammad-Ali Zaini, an Iraqi who left the country in 1982 after working as researcher at the ministry’s department of economic studies and finance.
Zainy has been tipped as a member of the oil sector’s advisory board that is being set up by the Defense Department, which will be led by former Shell Oil CEO Philip Carroll and by Fadhil Othman, another former Iraqi oil official. “Zaini is not a member of Carroll’s advisory board. He’s an advisor to ORHA,” said Darrin McDufford, a public affairs officer with ORHA.
Although Carroll is due to arrive in Iraq over the weekend for initiation into the Iraqi oil industry, his advisory board does not yet have official status, US officials in Baghdad say. Its role is vaguely defined as offering advice and guidance on long-term policy issues.
Iraqi oil ministry officials are not keen to discuss such policy issues at the moment, including the future of the two upstream oil outfits, North Oil Co. (NOC) and South Oil Co. (SOC) — even though this has become an important subject of debate in US neo-conservative circles.
But one official did caution against US attempts to impose its ideas of reform on the industry.
“To get things rolling again, we have to make do with what is there. The same system will continue to exist for some time,” said Radwan al-Saadi, director general of the ministry’s economics and finance department. “Privatization will be discussed at the national level once an internationally recognized government is in place,” he added. “Failing that, doing it by force is nothing but piracy.”
Other Iraqi officials who are more willing to contemplate privatization say the refining and retail sectors could be sold off easily, without much controversy.
“It would mean reducing the burden of additional expenses from the public companies,” said one official.
As for NOC and SOC, the general consensus among Iraqi officials is that their operations should be left intact — perhaps even adding one more state company for the eastern area of the producing Missan fields — while opening access to new fields to international oil companies.
Iraqis say openings at the northern, central, and southern fields could be negotiated with consortia, which are considered easier to deal with than a series of individual companies, as has been the case over the last decade, and that production-sharing contracts could be on the table.
“This should be debated at the national level, but I don’t see a problem in discussing it with the advisory board the US is setting up. Let’s see what they have to offer us in terms of advice,” said another official, who has been involved in negotiating contracts with foreign companies in recent years.
By Ruba Husari, Baghdad
(Published in International Oil Daily Wednesday, May 7, 2003)