Oil groups snub US on Iraq deals
By Carola Hoyos in London
Published: July 24 2003 22:00 | Last Updated: July 24 2003 22:00
Some of the world's biggest oil companies have warned the US administration that they will not make large investments in Iraq while the security situation remains so dangerous.
The reluctance of the industry to invest long-term is a setback to US efforts to revive the oil industry and rebuild the economy. Industry experts estimate it would cost $30bn-$40bn to tap the full potential of Iraq's vast oil deposits.
It is understood high-ranking US officials recently met some heads of international oil companies to sound them out about when companies would be willing to start investing. Industry executives expressed concerns over the lack of security and political legitimacy. They say the US-backed authority, so far, had too little representation.
Such concerns were amplified on Thursday by Sir Philip Watts, chairman of Royal Dutch/Shell, who told his company's results meeting: "The safety our people is paramount. There has to be proper security, legitimate authority and a legitimate process . . . by which we will be able to negotiate agreements that would be longstanding for decades. We wouldn't go into that situation unless these conditions were satisfied because we are a long-term business doing long-term projects and we need the framework in which we can make this sort of investment decision."
US inability to bring security and a legitimate transitional authority to Iraq has forced oil companies to shy away from setting up all but a low-level presence. Even services companies such as ExxonMobil and ChevronTexaco of the US and BP and Royal/Dutch Shell have been disappointed at the pace of progress.
They are needed immediately to repair oil infrastructure and boost exports, but fear tenders due to be awarded next month by the US Army will be considerably less than the maximum expected $1bn.
Walid Khadduri, editor of the influential Middle East Economic Survey, said: "The danger today is that, if the political situation deteriorates - and this is a real threat - the oil industry will not only be unable to expand but could also fail to return to its previous capacity."
Sir Philip said: "When the legitimate authority is there on behalf of the people of Iraq, we will know and recognise it."