BP Executive To Head New Iraq National Oil Company?

Since the beginning of the war in Iraq there has been increasing speculation about which companies will benefit. As the Ba'ath Party regime is replaced with one more friendly to foreign interests Western oil majors will be some of the first to enter Baghdad. These companies have been coveting Iraq's oil wealth and over recent years, even with crippling UN sanctions in place, competition among the companies for Iraqi oil concessions has been fierce.

TotalFinaElf has been a frontrunner in the race for Iraqi oil. In 1998 Total (prior to the Elf and Petrofina mergers)1 opened an office in Baghdad and the company negotiated, but never signed, agreements to develop two of Iraq's largest oil fields, Majnoon and Nahr Bin Omar. The contracts were valued at 7 billion US dollars and would have doubled Total's oil reserves prior to merger. Under the deal Total's Iraqi production could have been as much as 400,000 barrels per day.2

The prospect of serious re-entry into the Middle-East, the worlds most significant oil producing region has had the oil majors salivating, as reserves in other parts of the world begin to decline. Most Middle-Eastern states have been out of bounds to Western capital for decades. Iran was the first to nationalise its oil in 1951 at the expense of the Anglo-Iranian oil company (later BP).3 Others followed, Iraq nationalising its oil in 19614 and the remainder in 1971-2.5

Bizarrely, despite the confiscation of its assets at this time the privately owned Iraq Petroleum company remained in existence. The company was originally set up in 1912 as the Turkish Petroleum Company and was renamed in 1929. The company (a private company rather than a PLC) was owned jointly by BP, Shell, Total and Standard Oil (Exxon).6 To this day it retains a London office7 and close links with BP8 and others.

The speculation is that the Iraq petroleum company may make a claim on its old assets in Iraq once a new regime is in place. The company received compensation when, in June 1972 Saddam Hussein directed the nationalisation of Iraq's oil industry.9 but if the company can show that the deal was signed under duress, it would pave the way for a fresh claim. The company might be deterred from such action if those who own the company (the oil majors) each receive a large enough slice of the Iraqi oil pie to satisfy their medium-term production targets. The OPEC nations control the worlds cheapest oil reserves (in term of cost of production)10 and there have been claims that Iraq, with the worlds second largest oil reserves (only Saudi-Arabia has more) is the worlds cheapest place to produce oil, perhaps at as little a 1.5 dollars per barrel.11

In a further twist, an ex BP man is being talked about as a possible head of a 'new Iraq' national oil company.12 Rodney Chase, deputy group chief executive of BP13 is currently favourite to head the overhauled company. Previously Phillip Carroll, formerly of Shell, had been touted as the top candidate for the job.14 In the US, those around Donald Rumsfeld have been lobbying for a Western oil man to be given the post, whilst those in the State Department are reportedly pushing for Arabs or at least Muslims to to appointed to such posts.15 Whoever is finally selected to head the new company will certainly be inviting Western companies to take a leading role in rebuilding an industry which is in need of attention following 12 years of sanctions.

Perhaps The UK's rush to war was in part fuelled by a desire to see its corporations at the front of the queue in post war Iraq? Lord John Browne, chief executive of BP has made no secret of his company's desire to re-enter Iraq, where it helped to discover oil reserves before it was forced out by nationalisation. As long ago as November 2002 Browne said "We have let it be known that the thing we would like to make sure, if Iraq changes regimes, is that there should be a level playing field for the selection of oil companies to go in there, if they're needed to do the work there"16 - a line which he has reiterated like a mantra when questioned on Iraq ever since. Despite this desire to see 'fair play' (between foreign companies) in post war Iraq Lord Browne will probably use BP's historical association with the country when arguing his case. However the other companies with which BP set up the Iraqi petroleum company will no doubt use the same arguments. Lucio Noto, CEO of Mobil (before their merger with Exxon), said in 1998 "I'm proud to say that we were part of the original consortium that discovered the Kirkuk field in Northern Iraq. It's part of the reason why frankly, we still have a love affair with Iraq. We may not like the guy who runs the store, but the merchandise in the store sure is attractive".17 Now that the store manager is to change, BP, Exxon, Shell and TotalFinaElf are likely to be lobbying (quietly) for their favoured shopkeepers.

Calouste Gulbenkian et al establish Iraq Petroleum Company 1912:
http://www.1uptravel.com/country-guide-study/iraq/iraq49.html

Ousting Hussein could open the door for U.S. and British firms. Chinese, French and Russian rivals would lose their edge:
http://www.latimes.com/la-fi-iraqoil12mar12,0,5495419.story

Total open offices in Baghdad 1998:
http://csf.colorado.edu/mail/revs/current/msg00038.html

Iraq within OPEC:
http://www.opec.org/Member_Counrties/Iraq/Iraq.htm

OPEC control the cheapest oil reserves:
http://www.gasandoil.com/goc/speeches/theoilprice_Thomas_Walde_07-09-00.htm

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1 Total buys Petrofina, Alexander's Gas and Oil Connections Feature, 4(2), 2/2/99, http://www.gasandoil.com/goc/features/fex90608.htm , viewed 19/4/03.

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