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Guest Post: Investing In Iraqi Oil And Gas: Too Risky?
Submitted by Jen Alic of OilPrice.com
Investing In Iraqi Oil And Gas: Too Risky?
Risk, like everything else, is relative. So, relatively speaking, Iraq is open for business and certainly a more attractive investment than, say, Libya—in part because it’s easier to see what’s coming in Iraq, while what’s coming in Libya for now is just chaos (and it’s already arrived).
First, let’s try to paint a picture of the overall security situation, which is also an exercise in relativity.
In the north, we have the territory controlled by the Kurdish Regional Government (KRG), where business is flourishing (along with corruption) and where one needn’t even engage a controversial Western private security companies to move around.
But also in the north, we have a belt of disputed territories, which lies between the KRG and the Iraqi central government, both geographically and politically. The clincher is that the KRG’s grand plans for two new pipelines that would bypass the central government and pump oil and gas directly to Turkey are to be undertaken in this disputed territory, specifically in Kirkuk.
Baghdad won’t stand for it. Already sectarian tensions are being fomented more intensely as Baghdad installs a new military operations center in Kirkuk and Iraqi and Kurdish forces begin a new showdown over security.
Business is pretty good in central Baghdad, where the security situation is fairly stable (again, relativity is necessary here), but where one doesn’t walk around without physical security. Mathematically speaking, of Baghdad’s 88 zones or neighborhoods, there are about 10 that should be considered highly dangerous. The rest are “safe”. “Safe” means that you have a 50-70% chance of coming out alive.
Then we have everything south of Baghdad, places like Anbar province and the Basra governate. Anbar is where al-Qaeda is regrouping for another round and preparing its forces to join the confrontation in Syria. Basra is Iranian territory—Iraq’s oil-rich golden egg where it is only Iranian influence that is keeping tensions on the low burn.
Throughout Iraq’s provinces, we have an increasing urge for autonomy, which would essentially render Iraq a failed state. So far, only Kurdistan has autonomy, but others are eyeing it: including DIyala, Anbar, Salahuddin, and Basra.
In terms of oil, Basra is the most important of these, and much of Basra’s population is angry with Baghdad because the provincial government does not have as much control as it would like over its natural resources and that the revenues aren’t trickling down to the locals.
ExxonMobil, for one, appears to have had enough, announcing recently that it may pull up stakes in Iraq’s south and stick to the Kurdish north, where the business arrangements are more flexible and the security situation more manageable, at least outside of Kirkuk.
So is Iraq too risky an investment? It depends how far ahead you want to look.
For the next two years, we will probably see more of the political status quo, largely thanks to Iranian intervention, which is the only thing keeping things from falling apart at the seams right now.
Further down the road, in the absence of a major increase in foreign investment and socio-economic improvement, we are likely to see the start of a failed state, a renewed civil war as more and more provinces jump on the autonomy bandwagon creating tensions among Sunnis and Shi’ites, and a bloody conflict over Kurdish independence.
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Easy, just do what is always done......spend billions of $$$ on drunk, stoned contractors to protect the workers.
Damn, Risk on is EVERYWHERE now.
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makes sense, I mean we spend billions on drunk stoned congressmen to keep us safe
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sarc off.
Bullshit.
the iranian intervention is preventing the situation to fall apart?
i thought that was pretty much the opposite
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TALK ABOUT A MAJOR SCREW UP. ONE IS REMINISCENT OF BUILDING NUMBER SEVEN BEING REPORTED AS HAVING ALREADY FALLEN BEFORE IT ACTUALLY FELL.
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religion is the evil in this world.
Fuck you and the broad-brush horse you rode in under.
The real danger is communism. 100+ million last century.
Religion? Not even close.
You're beating on a dead horse with that one. Communism is pretty much dead and burried after the results of several attempts to bring it about through the Revolution of the Proletariat ended up in just your run o' the mill dictatorships but with red trimmings - at this point anti-Communist ranting just sounds like an unhealthy obssession left over from McCarthist indoctrination. Might as well rant about the health dangers of the Black Plague.
Nah, the parent poster is right (though maybe his brush was stroking a bit too broadly): religious ideologies are latest and greatest justification to kill your fellow man (well, they kind of been that on and off since time immemorial).
Think of Catolics vs Protestants in Northern Ireland, of Sunnis vs Shi'ites vs Alawites vs Jews in the Middle East. Think of the Saudis openning up madrassas (religious schools) in Pakistan for their xenophobic version of Islam (Wahabism) and the increase in violence that followed. Think of just how many American born-again Christians are more than happy to send young American men and women to go kill brown islamic people in far away lands.
I'm just surprised the Budhists haven't gotten in on the bandwagon yet.
Bhuddists are the worst.
Just think about all the billions and billions of carrots, tomatoes, and celery stalks they have killed. Absolutely horrific.
and their sense of fashion - the hair, the color blind wardrobe, all that acapella...
And most of your comments target recent events. Don't forget the holocaust, crusades, inquisitions, and times like the when the Romans tried to supress Christians. All those deaths surely add up significantly.
>> Communism is pretty much dead and burried
Have you seen the President of the USA lately?
Thousands of lives for what?
To back out and not even get any oil?
The Romans had more of a clue than we do; follow your crazy religion, just pay taxes and stay out of the way.
We give up our kids, back out, and get what? A black eye? A bad name? Derision and humiliation? Stupid.
Any oil?
'American' economics makes outsourcing an essential.
Outsourcing: when environmental conditions make it that consumption in a place is more profitable than consumption in another place.
Given this essential, iraqi oil was never meant to be consumed on the US territory but to feed the various places in the world that sustain the 'american' consumption pattern.
Iraqi oil could go like in Congo to dig out coltan to be shipped in SE Asia so electronics components can be assembled into an IPad that is to be shipped to the US.
This is a US world order and the world is organized to sustain 'american' consumption patterns.
These include that robbed from Iraqis oil must be consumed elsewhere than in the US.
If you don't understand that oil = food first and foremost you don't get it.
all the untapped oil in Iraq equals...one year of the world's consumption. The game is up. We should have spent the lives, the money, and the hatred on the new systems - which are innevitable
Like in Afghanistan, too risky for U.S. companies, a great investment opportunity for the Chinese. Uncle Sam couldn't bomb Iraqis into friends.
As shown blatantly today, as the tale of decoupling falls heavily down, China is integrated in the US world order consumption patterns.
They have no great investment opportunity.
But hey, fantasy dominates 'american' minds so what?
It's a global kleptoligarchy.
Sacrifice the citizens for the benefit of the corporation/government kabal.
Eventually, if the whole area isn't nuked during a war with Iran that is, the USA, UK, Israel will control the the Kurdish sector. There will be a Shia area aligned with Iran and the Sunni area aligned with Saudi Arabia
There may be mutually beneficial economic interests, but there is no controlling of 'em Kurds. Within 30-50 years, Kurds will carve their own state from Turkey and possibly other countries where they are a minority (Iran, Iraq, Syria). Turkey can not prevent this from happening, as the demographics are on Kurds' side. With oil, an independent Kurdistan might work, despite of it being landlocked.
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What in THE hell are you babbling about? Drunk posting with a ghostbuster sign.
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Want to talk about risk?? Be a scientist in Italy!
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L'Aquila earthquake scientists sentenced to six years in jail
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That was one hell of a WTF read..
Wow.
The US does business in the Middle East to stabilize the area and to kick Europe in the nuts every now and then. One of the many tactics US policy deploys to run the planet.
Kurd Furgeson Crude Oil Report ? Federal government wages "TAX GENOCIDE" on white/jewish/asian Americans and a few other off beat but productive races !
It all depends on the region. I own a stake in russian Lukoil OAO, whose future is signigicantly tied to Iraq's West Qurna-2 field.
It is refreshing to see the Iranians referred to as a stabilizing influence - so different from what the newspapers and TV want us to believe.
You gotta figure there's lots of jobs with these companies in high risk areas like that making lots of money. How does one get a job with them over there?
Even after 10+ years the peasants around the world don't regard us as liberating Gods for freedom and democracy, they think the US are invading occupiers. I guess the neo-K model will need adjusting to show killing should increase until percieved freedom is maximized. Capitalism at the end of a gun seems to be waning, should of spent more on bribery and given up more of the CIA drug trade.
I hear those Chinese Commies have a new system that I am still looking into. Apparently they are looking to invest in infrastructure, pay royalties and a percentage of the product per barrel without actually invading. Sure sounds like a commie plot, will tell you what it is called when I find out.
The various energy think tanks that were in the pockets of the fossil fuel interests had touted Iraq as our designated saviour from Peak oil... I guess that scripture has to be rewritten....
According to the latest puff piece by Maugeri, thoroughly discredited here
http://www.theoildrum.com/node/9495,
Iraq was going to be outproducing Saudi Arabia within 8 years... Maugeri's piece was touted, along with the CITI group propanganda on US oil independence, as evidence of new energy paradigm. Too bad they got the wrong paradigm...
Exxon had interests with both the gov. in Erbil and the gov. in Baghdad.
Baghdad Bob said no more ménage à trois with the dirty Kurd.
Since fundamentally Exxon is interested in making deals that will continue to accrue profits to their shareholders, it would not appear to be a vote of confidence in the long term survivability or supremacy of the gov. in Baghdad. Given Exxon's boots on the ground and their own dollars the table, their vote counts more than the commentariat's.