Iraqi Opposition to BP’s Rumaila Contract

19 Jul 2009 admin

Iraqi oil workers have come out in strong opposition to BP’s new contract for the super-giant Rumaila oil field, saying they will not allow foreign oil companies

Signed in early July as part of the first bidding round for Iraq’s oil, the 20-year contract gives BP and Chinese oil companyCNPC significant control over production from Rumaila, which holds reserves of 17.8 billion barrels – more than twice Azerbaijan’s total, and over 10% of Iraq’s proven reserves.

Hassan Juma’a, president of the Iraqi Federation of Oil Unions (IFOU) said that: “We think that these contracts are illegal and illegitimate” and that “We oppose the position of the (Ministry of Oil) that signed the contracts, but we also oppose the position of the foreign companies that signed illegitimate contracts without looking for gaps such as the role of the oil union.”

Faleh Abood Umara, the General Secretary of the Union, said that the union: “will arrange protests and strikes if the foreign companies have entered Basra.”

Clear opposition to BP’s newly signed contract also came from the current and the past management of the South Oil Company, the Iraqi state company that currently produces from the field. They feel the Iraqi Oil Ministry could have focused on allowing the state companies to fix existing infrastructure to increase production, rather than being pre-occupied with opening up known fields to foreign oil companies.

Both the workers and the management are open to foreign oil companies playing a role in Iraq – but preferably as service contractors — providing technical experience while allowing Iraqis to control their own oil. Hassan Juma said: “What we want from the foreign companies is to give their efforts to serve the interest of the Iraqi people and not to just increase the oil production or develop the oil fields.”

Iraqi oil analyst Munir Chalabi has produced an analysis of BP/CNPC’s contract, concluding that while the 20 year technical service contract is not in itself privatization, it represents “a very dangerous move, leading to the dismantling of the Iraqi national oil and gas industries.”

Particular concerns include the “field operating divisions” (FODs), which exist as legal entities and give BP/CNPC a major role in “their decision-making, control, management, development and operation of all the giant fields.” Chalabi feels that these FODs would also would “mean the fragmentation” Iraq’s North Oil Company and South Oil Company, which currently produce Iraq’s total of 2.4 million barrels per day and employing 20,000 people. Having operated Iraq’s oil &gas fields through 30 years of sanctions and war and built up enormous experience, “their role will be reduced to no more than sub-holding companies for the giant oil fields, and limited in their management to distant and marginal fields.” The contracts undermine the national oli companies, creating greater pressures towards privatization, threatening a situation where Iraq is no longer able to produce its oil autonomously.

Chalabi argues that the question for those concerned with the impacts of privatisation of Iraq’s oil is not merely “will there be Production Sharing Agreements?” The signed and proposed contracts in the current bidding rounds are undemocratic, damaging to the rights of oil workers and undermine Iraq’s economic future. Chalabi argues that the “Heads of Agreement” which gave Shell a virtual monopoly over gas production in Iraq’s south is “as disastrous to the future of Iraq’s economy and political independence as any PSC contract, if not worse”.

Various oil producing countries have allowed foreign oil companies in after years of self-production — Russia, Azerbaijan and Algeria in the 1990s, Libya and Iran in the 2000s. However, Iraq’s attempts to sign 20 year contracts for 80 billion barrels of its reserves in less than a year is unheard of.

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