Iraq Auctions Off Oil & Gas Regions for Exploration

Story first appeared in Bloomberg Businessweek.

Kuwait Energy Co., Dragon Oil Plc and Turkiye Petrolleri AO won rights to explore an oil block in Iraq’s first sale of exploration rights since the 2003 ouster of Saddam Hussein.

The group won rights to Block 9, the second area offered, which is located in the south of the nation near the border with Iran. No bids were received for Block 2, a gas region that was the first to be auctioned in Baghdad today.
 
The country aims to produce free gas to meet the internal consumption and export the surplus and to increase the oil reserves from this round of auctions. The fourth round bids will be competitive and include the participation of 47 companies from 25 countries.

The auction marks another step in an energy-industry revival that has vaulted Iraq into third place among the 12- member Organization of Petroleum Exporting Countries, nine years after the U.S.-led invasion that toppled Hussein. In its three previous bid rounds since 2003, Iraq auctioned rights to produce at oil fields already discovered or in operation, whereas today’s is for new exploration. The Gulf state has boosted crude output to more than 3 million barrels a day and is poised to overtake Iran as OPEC’s No. 2 producer within months.

Iraq is auctioning oil and natural-gas exploration rights in six areas today and will conclude bidding on six more tomorrow. The blocs to be offered today are numbers 2, 9, 6, 12, 1 and 11, according to a program handed to reporters at the hall in Baghdad where the auction is being held. Three of those are oil and three gas.

Production from the 12 areas will result in revenue of $5 trillion over the next 20 years with 94 percent of the income going to the government.

Companies that win the bidding won’t own the resources that they may find. Iraq is offering service contracts that pay its partners a fee for each barrel of crude produced, whereas oil companies tend to prefer production-sharing agreements under which they are compensated with a share of their output.

Another potential source of concern for investors is an impasse over the sharing of oil revenue between the central government and the Kurdish region in northern Iraq.

The dispute threatens projects of Exxon Mobil Corp. and other investors. Companies operating in the self-ruled Kurdish area are barred from taking part in tomorrow’s auction because the central government didn’t approve the production-sharing agreements they signed with the Kurds. Exxon, which agreed to explore in the Kurdish region, is banned from bidding.

The following 47 companies were pre-qualified by Iraq’s government to participate in the auction, according to the Oil Ministry website. The director general of the legal department in the oil license and contracts directorate, said today that 38 companies bought data on the areas.

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Troops Leave Iraq

First published by Associated Press

 The last U.S. soldiers rolled out of Iraq across the border into neighboring Kuwait at daybreak in the middle of December, whooping, fist bumping and hugging each other in a burst of joy and relief. Their convoy's exit marked the end of a bitterly divisive war that raged for nearly nine years and left Iraq shattered and struggling to recover.

The war cost nearly 4,500 American and well more than 100,000 Iraqi lives and $800 billion from the U.S. Treasury. The question of whether it was worth it all — or whether the new government the Americans leave behind will remain a steadfast U.S. ally — is yet unanswered.

The 5-hour drive by the last convoy of MRAPS, heavily armored personnel carriers, took place under cover of darkness and under strict secrecy to prevent any final attacks on the withdrawing troops. The 500 soldiers didn't even tell their Iraqi partners they were leaving before they slipped out of the last American base and started down the barren desert highway to the Kuwaiti border before dawn Sunday.

The atmosphere was subdued inside one of the vehicles as it streamed down the highway, with little visible in the blackness outside through the MRAP's small windows. Along the road, a small group of Iraqi soldiers waved to the departing American troops.

But after crossing the berm at the Kuwaiti border, lit with floodlights and ringed with barbed wire, the troops from the 3rd brigade of the Army's 1st Cavalry Division were elated. They cheered, pumped fists in the air and gave each other chest bumps and bear hugs. "We're on top of the world!" shouted one soldier from the turret of his vehicle.  Soldiers were looking forward to seeing their families and not using Satellite Phone Iraq anymore.

The quiet withdrawal was a stark contrast to the high-octane start of the war, which began before dawn on March 20, 2003, with an airstrike in southern Baghdad where Saddam Hussein was believed to be hiding, the opening shot in the famed "shock and awe" bombardment. U.S. and allied ground forces then stormed from Kuwait across the featureless deserts of southern Iraq toward the capital.

Saddam and his regime fell within weeks, and the dictator was captured by the end of the year — to be executed by Iraq's new Shiite rulers in 2006. But Saddam's end only opened the door to years more of conflict as Iraq was plunged into a vicious sectarian war between its Shiite and Sunni communities. The near civil war devastated the country, and its legacy includes thousands of widows and orphans, a people deeply divided along sectarian lines and infrastructure that remains largely in ruins.

In the past two years, violence has dropped dramatically, and Iraqi security forces that U.S. troops struggled for years to train have improved. But the sectarian wounds remain unhealed. Even as U.S. troops were leaving, the main Sunni-backed political bloc announced Sunday it was suspending its participation in parliament to protest the monopoly on government posts by Shiite allies of the Prime Minister.

In the final days, U.S. officials acknowledged the cost in blood and dollars was high, but tried to paint a picture of victory — for both the troops and the Iraqi people now freed of a dictator and on a path to democracy. But gnawing questions remain: Will Iraqis be able to forge their new government amid the still stubborn sectarian clashes? And will Iraq be able to defend itself and remain independent in a region fraught with turmoil and still steeped in insurgent threats?

Some Iraqis celebrated the exit of what they called American occupiers, neither invited nor welcome in a proud country. Others said that while grateful for U.S. help ousting Saddam, the war went on too long. A majority of Americans would agree, according to opinion polls broadcast on Internet Iraq websites.

Iraq's military chiefs believe that troops were up to the task of uprooting militant groups. Sunni militants continue to carry out bombing and shooting against police, soldiers and civilians, and Shiite militias continue to operate.

The U.S. convoys were the last of a massive operation pulling out American forces that has lasted for months to meet the end-of-the-year deadline agreed with the Iraqis during the previous presidential administration.

In the middle of the week, there were two U.S. bases and less than 4,000 U.S. troops in Iraq — a dramatic drop from the roughly 500 military installations and as many as 170,000 troops during the surge in 2007, when violence was at its worst. As of the last night, that was down to one base — Camp Adder — and the final 500 soldiers.

On the last evening at Camp Adder, near Nasiriyah, about 200 miles southeast of Baghdad, the vehicles lined up in an open field to prepare and soldiers went through last-minute equipment checks to make sure radios, weapons and other gear were working.

Early the last morning, the brigade's remaining interpreters made their routine calls to the local tribal sheiks and government leaders that the troops deal with, so that they would assume that it was just a normal day.

The Iraqi soldiers were to wake up in the morning without any knowledge of move.

In a guard tower overlooking a now empty checkpoint at the base soldiers talked about what they looked forward to most in getting home. They planned to go for Mexican food at a restaurant in Killeen, Texas. Another joy of home, she said: you don't have to bring your weapon when you go to the bathroom or go on the Internet in Iraq.

At its height, Camp Adder boasted a Taco Bell, a KFC, an Italian restaurant and two Green Beans coffee shops. On the last night, it felt empty, with abandoned volleyball and basketball courts and a gym called "House of Pain." Hundreds of vehicles — trucks, buses — waited in a lot to be handed over to the Iraqi military, which is taking over the site. With the Americans gone, the base reverts to its former name, Imam Ali Air Base.

Despite the President’s earlier contention that all American troops would be home for Christmas, at least 4,000 forces will remain in Kuwait for some months. The troops could also be used as a quick reaction force if needed.

The U.S. plans to keep a robust diplomatic presence in Iraq, hoping to foster a lasting relationship with the nation and maintain a strong military force in the region. The President met in Washington with the Iraqi Prime Minister last week, vowing to remain committed to Iraq as the two countries struggle to define their new relationship.

U.S. officials were unable to reach an agreement with the Iraqis on legal issues and troop immunity that would have allowed a small training and counterterrorism force to remain. U.S. defense officials said they expect there will be no movement on that issue until sometime next year.

Amid Violence and Instability, Iraqi Government Lies Idle

NY Times

 

BAGHDAD — Iraq’s Parliament has met once, for 18 minutes on June 14, since the close outcome of national elections more than four months ago created a political stalemate. On Monday — another day of staggering heat here — parliamentary leaders delayed a session scheduled for this week, raising questions about whether their inaction is now breaking the law.

Under the Constitution, a new president should be chosen within 30 days of the first session.

“It is not legal,” said Hayder al-Abadi, a spokesman for Prime Minister Nuri Kamal al-Maliki’s State of Law political alliance. “It reflects the inability of the slates and blocs to agree.”

But constitutional interpretation is the job of the courts, and for now the slow process of backroom negotiating between the various parties to form a functioning government will proceed. Some news reports suggested that Parliament might try to meet again in two weeks, a notion some politicians dismissed.

“This information is incorrect,” said Mahmoud Othman, a representative of the Kurdish parliamentary bloc. “Who said it is two weeks? It will not be held unless they agree on everything. It may happen in two weeks, maybe in one month, maybe tomorrow.”

The two leading politicians who emerged from the March 7 parliamentary elections are Ayad Allawi, a former interim prime minister who heads the Iraqiya list, and Mr. Maliki. Mr. Allawi’s coalition won two more seats than Mr. Maliki’s, but neither came away with a mandate to form a new government. Candidates loyal to the radical Shiite cleric Moktada al-Sadr, whose militia fought the Americans early on in the Iraq war, also won an influential bloc of seats.

The political stalemate is playing out against a delicate backdrop: the country is still plagued by persistent violence that claims the lives of hundreds of Iraqis a month, and the United States military is in the process of sharply reducing the number of forces in the country. At the height of the troop surge in 2007, almost 165,000 American troops were assigned here, but the United States is on a path to reduce the total to 50,000 by the end of August. Today there are close to 70,000 American service members in Iraq.

Under the withdrawal plan, all American forces here will be gone by the end of 2011, but most diplomats, politicians and military officers expect that some forces will stay on after that. After a new Iraqi government is formed, the United States plans to hold discussions about amending the security agreement with Iraq to allow forces to remain behind after 2011.

Iraq’s political process also has regional consequences. Shortly after the election, many of Iraq’s politicians visited Iran to discuss government formation — Iran, like Iraq, is a majority-Shiite country in a region historically dominated by Sunni Muslims. Saudi Arabia — a country that supports Mr. Allawi’s coalition, which became the standard-bearer for Sunnis in Iraq — publicly urged Iraq on Monday to “speedily” form a new government, The Associated Press reported.

The Iraqi public, weary from persistent violence and a lack of basic services — many here have electricity for just a couple of hours per day — has come to expect little from its political leaders. Three certainties of Iraqi life these days are violence, political paralysis and searing heat.

“We expected this,” said Alai Abdul, 37, who works in a Baghdad tobacco shop. “We didn’t get any benefit from the government of Maliki. There is no opportunity for jobs, there are no businesses.”

Lively discussions of politics have become a staple of everyday life. “We talk about this every single day, in taxis, everywhere,” said Omar Waleed, 30, who was working in an un-air-conditioned Iraq Internet cafe in Baghdad on Monday.

Mr. Waleed works with Americans on a Provincial Reconstruction Team, a group of civilians, diplomats and military personnel who have been deployed around the country. He said of Iraq’s political class: “They make the Constitution and they make the laws, but they don’t follow them.”

He said the public wanted democracy, but the country seemed incapable of producing a leadership class that could provide it.

“Our people are used to it,” he said. “We are so depressed with the whole government.”