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The Gold Rush in Iraq
There is a Gold Rush Underway in Iraq, with major implications for the rest of us. The success of the recent oil auctions in Iraq is creating a windfall for American oil services companies.
Schlumberger (SLB), Baker Hughes (BHI), Weatherford (WFT), and Halliburton (HAL) have committed to drilling 2,500-3,000 new wells per year and building new pipeline and shipping terminal infrastructure that could make Iraq the world’s largest oil exporter. The value of these contracts may reach a massive $60 billion over the next six years, and could generate $1 billion in new revenues for each company per year.
Two offshore terminals are already under construction, and another two are on the drawing board. If successful, the project will boost the country’s oil production from the current 2.5 million barrels a day to 12 million b/d by 2016.
Iraq’s oil production peaked at 3 million b/d in 1979, and then went to nearly zero after it invaded Iran. I remember those days well, as I was issued a visa to accompany Saddam’s troops to Tehran, only to see it cancelled when the Iranians were able to mount a counter offensive. I still have the dessert camos and telephoto lenses need to cover the desert war, although the pants, regrettably, no longer fit.
Iraq’s oil industry never recovered. UN sanctions limited the regime to minimal “official” exports that covered humanitarian imports like baby food and drugs. Tanker trucks smuggled out through Jordan what they could, with the proceeds going directly to Saddam’s family. When the US invaded, bails of hundred dollar bills were found stashed in private homes, the proceeds of these black market deals.
American oil engineers were shocked by the poor state of Iraq’s energy infrastructure after 40 years of neglect. It all has to be rebuilt from scratch. If the new Iraqi government can provide the necessary infrastructure, and stabilize the political and security environment, it will become one of the largest changes to the landscape for international trade in decades.
Those are all very big “ifs”. It will dump another Saudi Arabia’s worth of crude on the market. It will also go a long ways towards meeting China’s insatiable demand for oil, as well as that of other emerging economies, and put a long term cap on prices.
Of course, this is the scenario that antiwar activists and conspiracy theorists feared eight years ago, but no one thought it would take so long to play out. With an oil man as president, a vice president from Halliburton, and a secretary of the army from Enron, who can blame them.
Early in the planning of the war there was an expectation the US could defray some cost of the war with newly freed oil exports. I know, because I was there, my eight years in the Persian Gulf earning me an appointment as an outside consultant. I bailed when I saw the whole project was hopeless. The Bush administration didn't exactly welcome alternative analysis or viewpoints. Ever notice that Iraq’s oil industry was never targeted during either gulf war? These are usually prime targets in modern warfare.
This is so important that I can’t believe no one else is talking about it.
To see the data, charts, and graphs that support this research piece, as well as more iconoclastic and out-of-consensus analysis, please visit me at www.madhedgefundtrader.com . There, you will find the conventional wisdom mercilessly flailed and tortured daily, and my last two years of research reports available for free. You can also listen to me on Hedge Fund Radio by clicking on the “Today’s Radio Show” menu tab on the left on my home page.
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- 1000 "the project will boost the country’s oil production from the current 2.5 million barrels a day to 12 million b/d by 2016. "
12 million b/d ??? Total nonsense!
Like Saudi Arabia, Iraq's super-giant oil fields are 40+ years old and are depleting rapidly. A more likely (and less propagandistic) estimate is 4.5 million B/D.
Nevertheless, the infrastructure and oil service investment needed to try and extend the life of the super giants, and find all the lesser reservoirs will be huge, so the investment thesis tied to oil service is right, but it is a thesis that applies world wide, not just in Iraq.
Ummmm... Contrary to Saudi Arabia, Iraq never fully exploited its own soil. One third of the country has been left unexploited on purpose for when Saudi Arabia could no longer act as a cartel breaker.
madhedgefundtrader's Mom has 'Son' tatooed on her arm.
Oh gosh, what a snake oil sale ! For sure, there will be money made, but there are so many problems with Iraqi oil production, it can fill a book.
You will be disappointed all along the way, but good luck !
mkkby- Even Robo??!!
This "new data" has been reported elsewhere for over a year. Most oil analysts think the projections will fall short by at least half. As usual MHFT is late, ignorant and arrogant. I say get rid of all these guest posts.
"There is a Gold Rush Underway in Iraq.... creating a windfall for American oil services companies."
No! Who could have seen it? Oh wait, Cheney saw it when he sat down with the oil companies beforehand and carved up a map of Iraq into chunks for them.
But who else could have seen it? Oh wait, millions of critics of the war, before, during and after the invasion.
But hey, what are tens of thousands dead, and trillions in new war debt for our kids, when there is some more money to be made by Texans?
No conservative worthy of the name should have supported this ridiculous expansionist, world-policing nonsense. No conservative worthy of the name should have anything but scorn for Bush, Cheney, or their war.
"Ever notice that Iraq’s oil industry was never targeted during either gulf war? These are usually prime targets in modern warfare."
Yes, IF the war is against the nation in question, and IF the invading force deems it necessary to destroy valuable infrastructure.
We were not at war with the Iraqi people, it was an effort to decapitate the Hussein government. Militarily, it was such an overwhelming invasion force that destroying all the major roads, oil/gas infrastructure, etc was not necessary. We wiped out their communications and air force and moved in -- why blow all that stuff up if you don't have to?
If it really was about getting in to take the oil, there would be no need to try to set up a democratic government and help the Iraqis elevate themselves. Much simpler to roll tanks in, grab the drilling/production facilities, and kill anyone who comes within 20 miles of the place.
Except that we're the United States. We ARE the good guys (even if we have some black patches on the white hat), and our motivation was not about seizing oil. We went in to take out a dictator, who was considered a threat to us by all concerned (the Dems were pushing for his ouster in 1998 - Albright, Kerry, Clinton, Berger et al) and by the intelligence available at the time. We saw the Iraqis as potential partners in democratic reform in the MidEast and chose to try to help. We've done a hash job at it, but the intent was good and we've been more successful than unsuccessful.
A reading assignment for those who think it was about EEEEEEVIL GWB AND HIS MERRY BAND OF OIL-MAD INVADERS:
http://skymusings.blogspot.com/2005/11/democrats-case-for-war-1998-1999.html
Woooooo, big delusion here.
You should revise your colonial history and the causes why it ended.
Or run with a gang for a few months.
Major lesson for an extortioner: people are not equally easy to extort. For the easiest extortion scheme, keep the easiest people to extort in position, dont substitute them.
So no, it was not easier to let the tanks run in and kill anyone who comes within 20 miles of the place. Because in this scheme, the oil production facilities would not be owned by people easy to skin and in the worst case, owned by people benefiting from same protection framework as the extortioner.
The easiest was to keep Iraqi people on location and developp a framework (mostly the Iraqi Constitution) so that they become agents in the transfer of the required resources.
With the US deal, the Iraqi society is designed to become a temporary vector to displace wealth from Iraq to other places. As soon as this job is done, the Iraqi society will have served its purpose and it will be over for them.
Either you're right or W et. al. screwed the pooch. US companies didn't get much in oil field rights.
http://www.iraqoilreport.com/oil/production-exports/
The US gets the same benefit as the rest of the world but paid most of the price. Shitty deal for the taxpayer...par for the course I guess.
<<< Ever notice that Iraq’s oil industry was never targeted during either gulf war? >>> Duh! No shit, fella. For a guy who was there for 8 years, he didn't lean anything. The mission was to oust Hussein and destroy his ability to threaten his neighbors. It was not to destroy the oil fields and infrastructure of Iraq in order to impose even more suffering on the Iraqi people.
The loons like dirtysouth have always been clueless but I expected more from someone who had been in Iraq for 8 years.
What is happening in Iraq is precisely what was supposed to happen; i.e., a brutal dictator gone, a stable form of democratic government (only the 2nd one in history in the ME, Israel being the 1st), and remove Iraq as ground zero for Al Qaeda/Hamas, etc. terrorists. If anyone cares to take a close look at the situation in Iraq, that is precisely what has happened.
Contrary to what most clueless loons believe, Iraq is in no hurry whatsoever to see the US Military leave. And who in hell did you think Iraq would use to rebuild their oil production infrastructure.... Iran and China?
Why not? They have no problem using their "improvised" weapons against us. Shia is shia to them.
The pols there don't want us to leave as long as they can suck a better titty from uncle sam than uncle haji (he's the uncle of iran).
I think the real reasoning behind the Iraq war goes like this:
We need to Stop Iran from going nuclear, but that would mess up the oil supply, so let's invade Iraq first, will be easy, then we can use Iraq's oil to replace Iran's.
Still might be what's going on.
It was always about two things:
1) Oil
2) Permanent forward military operating bases in the heart of the ME
They complement each other and can have long-lasting effects for generations.
And at what a cheap price/bbl!
http://www.icasualties.org/
http://en.wikipedia.org/wiki/Casualties_of_the_Iraq_War
Luckily, we don't have any more worries about casualties, because the leftists in power have done precisely what they promised during their campaigns - pull us out of iraq. Or did I miss something?
This dude is usually a few bricks shy of a full load, but it's true that Iraq has Saudi sized reserves. With the States ever so slowly moving to natgas, energy may be less of a problem than many expect.
"This dude is usually a few bricks shy of a full load..."
You Are Reading "The Chronicles of Commander McBragg"
McBragg: "There! The deserts of Mesopotamia! I was advising the Sultan on oil when..."
Annoyed Club Member: "ANOTHER desert adventure, Commander?"
McBragg: "There! The Nation's Capitol! I was dining with James Baker III when..."
Annoyed Club Member: "ANOTHER famous skank politician adventure Commander?"
"This is the World of Commander McBragg
Your head will whirl in the World of McBragg.
He can do anything
In his world he's a king...
Or so says the brag of McBragg."
You mean it was a war over oil? Who is gonna believe that?
Not me.
For the delusional masses out there who were swinging off of Bush's sac for eight years...
Yes, this means all you Tea Baggers, who still can't see the forest for the trees. Enjoy your depression f**ktards.
Say hi to Mammon for me.
What a bag of nonsense from this Tea Cupper. Spit that out fella. That Sh*t Ain't Right.
http://www.youtube.com/watch?v=-C9h_cVm7sA
There was no need to target any of the Iraqi oil infrastructure. They were not using any of it for any military advantage in a war that lasted just a few weeks.
Dirty South? Have you seen how dirty Manhatten and LA are?
How did Media Matters and DailyKos end up at ZH?
Get off the Left/Right divide -- both parties' leadership and influential membership is made up of the same "me-first" power whores. They BOTH have contributed to the events which we are facing.
Community Reinvestment Act (CARTER) - required banks to lend to low-income and high-risk borrowers for home loans.
Ted Kennedy (DEM) - inventor of the HMO, the failure of which has led directly to current federal overreach in healthcare.
Ted Kennedy (DEM) and GW Bush (REPUB) - the disastrous Education Bill and No Child Left Behind....more gov't waste directly into the pockets of union thugs.
GW Bush and the Republicans -- the disastrous Farm Bill....further welfare for corn farmers who already triple-dip.
Barney Frank and Chris Dodd (DEMS) - built up Fannie/Freddie and strangled efforts to rein them in over the last 5 years.
GW Bush (REPUB) - can be fairly damned for his part in encouraging further legislation regarding risk/lending practices. But he is not the devil, and to hang everything on him demonstrates a very narrow vision of the world. It is no different from those on the right casting Bill Clinton as the Devil. In both cases, voters were sold a more substantial vision (left/right) than the product delivered, and both proved to be very middle-of-the-road in terms of legislation and lack of real reform.
SEC (both under GWB and Obama) - not overtly partisan; they serve their federal masters regardless of party and serve as a block to keep the big guys trading one way and the rest of us another way.
There are plenty of examples of mal-leadership on BOTH sides. Get away from the divide that they put on us.
THEY are the enemy, not your lefty/righty neighbor. They have it set up so we fight each other instead of them -- ever heard of "divide and conquer?" Drop the ridiculous TeaBagger comments (there are people of both sides involved -- wanting our legislators to do as we ask is not a point on the political spectrum) and realize that it's the People versus the Power, regardless of which color tie the Liar-in-Chief is wearing.....
Oi! +1
Great post.
lol....typical liberal. Your mother forgot to teach you manners?
Iraq doesn't really have forests...
But true it is. There has never been a civilisation who grew without war.
Rome, China (ancient), England, Europe....
Obama wil realize this very soon, and will be forced to put half the world on fire as this will be the only way to fix this crisis and create more wealth.
FOR US!
Wrong, the british empire was built on trade, with the royal navy being created solely to protect trade routes. it was only later that the politics in the uk turned religious and religion was them forcibly imposed against the wishes of those brits based in the trading partner countries. The imposition of christianity thereafter relied on military support the end result being colonisation and the beginning of the end of the empire.