'Big Oil' Returns To Redevelop Iraq's Oil Fields

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In the six years since the U.S. invasion, Iraq's oil production has hardly matched the level under Saddam Hussein. Iraq's oil minister had been harshly criticized, but this week the world's largest oil companies signed multi-billion dollar deals to redevelop Iraq's oil fields. What's most impressive is that the oil minister got the companies to accept Iraq's conditions and terms.

STEVE INSKEEP, host:

It's MORNING EDITION from NPR News. I'm Steve Inskeep.

RENEE MONTAGNE, host:

And I'm Renee Montagne. Our next two stories are about troubled countries with large quantities of oil. We start in Iraq, where big international oil companies are returning. It has taken a while. In the six and a half years since the U.S. invasion, Iraq has struggled to bring oil production up to the levels it had under Saddam Hussein.

Iraq's oil minister has faced harsh criticism, but this week the world's largest oil companies signed multi-billion dollar deals to redevelop Iraq's oil fields. And the oil minister got them back doing business on his terms. NPR's Quil Lawrence reports.

QUIL LAWRENCE: Even before the deals were signed, Iraqis turned out looking for the new jobs they hope Iraq's oil bonanza will create.

Unidentified Man #1: (Foreign language spoken)

LAWRENCE: Outside an oil ministry office in the southern city of Basra, two enterprising men set up printers and copy machines on carts that look like they're made for selling fruit. As their portable generators roared, they help the throng of job seekers copy documents and prepare applications. Abdullah Abdul Widud(ph) landed a job as a truck driver.

Mr. ABDULLAH ABDUL WIDUD: (Foreign language spoken)

LAWRENCE: Foreign companies are coming back to Iraq, he says, and it's going to be good.

Iraqis haven't always welcomed multinationals here. The nationalization of the oil industry in the 1970s is still a source of pride, and most Iraqis are suspicious that foreign oil companies come only to steal the country's wealth.

Last spring, Iraq's oil minister offered a hard bargain: a flat fee of $2.00 per barrel to modernize Iraq's existing oil fields. Most of the multinationals told Iraq no thank you and walked away. But then they came walking back.

Unidentified Man #2: Minister, ladies and gentleman, BP's delighted to have the opportunity to participate in rebuilding the Iraqi oil industry for the benefit very much of Iraq.

(Soundbite of applause)

LAWRENCE: British Petroleum, along with China's national oil company, were the first ones to accept Iraq's terms. They finalized the deal on Tuesday. Then yesterday, Exxon Mobile and Royal Dutch Shell came across. The deals bring a combined $65 billion to develop Iraq's oil infrastructure. Eighty-five percent of the employees at the oil fields must be Iraqi and the companies guarantee they will train up Iraqi engineers to do high-skill jobs. Husayn Al-Shahristani is Iraq's oil minister.

Mr. HUSAYN AL-SHAHRISTANI (Oil Minister, Iraq): The prices that Iraq has set has really limited profit for them, but I'm very pleased that we have succeeded to convince the biggest oil companies in the world to accept these Iraqi conditions and terms.

LAWRENCE: The big companies couldn't resist the chance to get a foot in the door on what is considered the world's last untapped oil giant. But Shahristani was not sounding so confident only a few months ago when Iraq's oil production dipped below its already weak levels and members of parliament were calling for him to be sacked. Shahristani, who is an ally of Iraq's current prime minister, says the criticisms were politically motivated.

Mr. SHAHRISTANI: Well, those very people are still calling for my head. So this excess hasn't convinced them either. The Iraqi people have seen what we have achieved.

LAWRENCE: But some of Shahristani's critics counter that the minister accomplished nothing in his first few years and then rushed all of the oil fields into a hasty auction, just in time for Iraq's general elections this January. Still, it's hard for them to argue with the terms of the contracts and the meager $2 per barrel given to the multinationals.

Still, old suspicions die hard. Jumaa Awad leads the union of Iraq's southern oil company employees.

Mr. JUMAA AWAD (General Union of Oil Employees): (Foreign language spoken)

LAWRENCE: The foreign oil companies will get more than their $2, he says, adding: I'm sure there was a secret deal.

Iraq is considered one of the world's most corrupt countries, but the auctions for these oil contracts were held live on television with little opportunity for backroom deals. Oil minister Husayn Al-Shahristani claims that in six years time Iraq will almost triple its oil production, and with that revenue rebuild the country.

Mr. SHAHRISTANI: If you come to Iraq in six years time, you will find a different country altogether.

LAWRENCE: Quil Lawrence, NPR News, Baghdad.

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