Iraq Cancels No-bid Contracts with Big Oil

By Anderson

These are dark days for American influence in Iraq, especially regarding access to oil by western interests. The White House backed Oil Law has been met with nothing but disdain in the Iraqi parliament and has gone nowhere. But a light shone briefly when it was announced in June that western oil interests had been awarded no-bid service contracts. While not exactly the big target, those contracts were seen as a "foot hold" to future Iraqi oil largesse. But then the majors got greedy.

Big Oil has been haggling with the Iraq Oil Ministry for weeks over terms of no-bid service contracts. And while western oil interests were arguing for payment in oil rather than cash, Iraq signed the country's first oil contract with the Chinese National Petroleum Company (CNPC). Reports further had it that the oil majors, Exxon, BP, Shell, Total and Chevron, were also demanding that they be "guaranteed a slice of the massive oil-pumping deal" in future expected Production Sharing Agreements (PSAs). The Iraqi government balked on such demands, seeing them as far too politically contentious, which they clearly were. Despite the obvious political difficulties, Big Oil held firm.

Now, after several weeks of wrangling over these demands in the no-bid contracts, Iraq Oil Ministry has cancelled the award.

Iraq’s oil minister, Hussain al-Shahristani, told reporters at an OPEC summit meeting in Vienna on Tuesday that talks with Exxon Mobil, Chevron, Shell, Total, BP and several smaller companies for one-year deals, which were announced in June and subsequently delayed, had dragged on for so long that the companies could not now fulfill the work within that time frame. The companies confirmed on Wednesday that the deals had been canceled.

Democrats claim this is some sort of victory, that they had opposed the no-bid deals because it would "undermine" Iraqi efforts to pass the much-maligned, though long anticipated, "hydrocarbon law," a label that apparently sounds better to American politicians than "oil law," as it is more generally known and loathed.

But those efforts to pass the Iraq Oil Law have been undermined for sometime, as the law itself is widely viewed by Iraqis as a license for resource theft. The Oil Law needs to be rewritten completely, without the "advice" of White House contractors, or it will forever languish.

This cancellation is not a result of Democratic protests, although I'm sure the Democrats are pleased enough with themselves to think that. It is a simple case of Big Oil demanding future guarantees and a failure to play the game close and quietly. Huff and puff demands rarely go over well with anyone, and western oil interests heavy handed insistence has obviously not served them well. It seems certain that western oil companies -- especially American ones -- feel entitled to all that luscious Iraqi oil, what with 140,000+ American troops in Iraq doing what they're doing to keep Maliki in power. But that doesn't mean they have to act entitled. And it is that sense of entitlement, and the unrelenting demands, are really what soured the deal.