On Monday, Prime Minister Nuri al-Maliki’s cabinet in Baghdad approved the draft of the new Iraqi oil law. The government regards it as “a major national project”. The key point of the law is that Iraq’s immense oil wealth (115 billion barrels of proven reserves, third in the world after Saudi Arabia and Iran) will be under the iron rule of a fuzzy “Federal Oil and Gas Council” boasting “a panel of oil experts from inside and outside Iraq”. That is, nothing less than predominantly US Big Oil executives. The law represents no less than institutionalized raping and pillaging of Iraq’s oil wealth. It represents the death knell of nationalized (from 1972 to 1975) Iraqi resources, now replaced by production sharing agreements (PSAs) – which translate into savage privatization and monster profit rates of up to 75% for (basically US) Big Oil. Sixty-five of Iraq’s roughly 80 oilfields already known will be offered for Big Oil to exploit … Nobody wants to colonial-style PSAs forced down their throat anymore. According to the International Energy Agency, PSAs apply to only 12% of global oil reserves, in cases where costs are very high and nobody knows what will be found (certainly not the Iraqi case). No big Middle Eastern oil producer works with PSAs. Russia and Venezuela are renegotiating all of them. Bolivia nationalized its gas. Algeria and Indonesia have new rules for future contracts. But Iraq, of course, is not a sovereign country. Big Oil is obviously ecstatic – not only ExxonMobil, but also ConocoPhillips, Chevron, BP and Shell (which have collected invaluable info on two of Iraq’s biggest oilfields), TotalFinaElf, Lukoil from Russia and the Chinese majors. Iraq has as many as 70 undeveloped fields – “small” ones hold a minimum of a billion barrels. As desert western Iraq has not even been exploited, reserves may reach 300 billion barrels – way more than Saudi Arabia. Gargantuan profits under the PSA arrangement are in a class by themselves. Iraqi oil costs only US$1 a barrel to extract. With a barrel worth $60 and up, happy days are here again.
Barkley challenges the claim that extraction costs are only $1 a barrel:
I note that Escobar’s article has some errors in it, including the ridiculous claim that it only costs $1 per barrel to pump oil in Iraq. It is up to $3 per barrel in Saudi Arabia, so, while there are still huge profits at $60 per barrel for crude, $1 per barrel is an understatement, raising some questions about Escobar’s general credibility.
Having no idea as to Mr. Escobar’s accuracy or credibility on this topic, his entire discussion should be fact checked. But Barkley’s general point about the lack of coverage of this story by the media is valid. I guess covering Anna Nicole Smith’s departure is more important to folks like John Gibson.