Baghdad oil talks do little to ease firms’ concerns
Oil firms fear political deadlock could slow decisions.
July 22, 2010 11:49 by Reuters
Little concrete progress emerged from a conference held this week by Iraq’s Oil Ministry to tackle oil firms’ complaints that bureaucracy and political deadlock are hindering vital projects, company executives said.
The two-day conference in Baghdad aimed to deal with logistical and infrastructure bottlenecks that international oil companies (IOCs) face as they start work on some of the biggest deals the oil industry has seen.
But the meeting, where BP ExxonMobil, Royal Dutch Shell, Italy’s ENI, China’s CNPC and others presented development plans for some oilfields, produced no clear steps on how to solve those obstacles, executives said.
Instead, it left some of them with a sense of frustration.
“We raised our issues. There is a lot of goodwill but no concrete steps. The expectation was that this conference would solve the issues faced by the IOCs on the spot,” said one oil executive who attended the meeting, which was mostly closed to journalists.
“It is a step but let’s see what will happen next. With the uncertainty of the government now, no one wants to make a decision. Some people are just afraid to lose their jobs.”
Iraq awarded a series of oilfield contracts after two bidding rounds last year that could boost its output capacity to 12 million barrels per day within seven years, from 2.5 million bpd now.
Those levels would rival oil powerhouse Saudi Arabia and give Iraq the billions of dollars it needs to rebuild its economy and infrastructure after decades of war, sanctions, sabotage and lack of investment.
Iraq held an election in March that Iraqis hoped would set them on the road to stability and prosperity after years of sectarian violence unleashed after the 2003 U.S.-led invasion.
But the vote produced no outright winner and as yet no new government as Shi’ite, Sunni and Kurdish factions jostle for advantage in coalition talks.
Oil majors are trying to push ahead with work on their oil deals despite concerns that the delay in the formation of a new government could affect their projects.
Some fear that prolonged political deadlock will hold up decisions on contracts for service work, such as building new pipelines or drilling wells, or affect administrative issues.
“Everybody is afraid that if they took a decision today, tomorrow things get spiked,” said a foreign oil executive in Baghdad. “They are working with brakes.”
As the oil projects get off the ground, inadequate dock space at Umm Qasr, the country’s main port, bureaucratic impediments to securing visas, customs clearance, and corruption have become top complaints of oil executives.
Iraqi Oil Minister Hussain al-Shahristani said on Sunday that, to address visa complaints, Iraq will issue them at airports for oil industry professionals.
The news was met with skepticism by oil executives who said that was already happening but had not helped.
“There is a lot of effort to solve the visa problem … but this has not worked out for everyone. It takes six to seven hours to get a visa and it is one of the biggest bottlenecks in Basra airport,” said one executive.
“There is only one counter with one man who can give you the visa, answer the phone and register the names. I hope things change, because it is getting uncomfortable for us,” another said.
At the meeting, an Iraqi official said it took months for Iraqis to get visas for Europe, suggesting foreign oil executives should be pleased at the speed at which they can get visas for Iraq, the executive said.
“They go to Europe for vacation, but we come here for work,” he said.
Despite dilapidated infrastructure and a scarcity of flights to the southern oil hub of Basra, the city is buzzing. Investors, oil executives, consultants, service and security contractors, are overwhelming Basra’s few hotels.
At the city’s only airport, Iraqi officials struggle to process unprecedented numbers arriving to join the oil boom.
Complaints from foreign oil firms about a lack of dock space and burdensome bureaucracy at Umm Qasr port prompted Iraq to seek an agreement with neighbouring Kuwait to open a special border crossing to ease the inflow of equipment for oil firms.
International oil companies are lobbying Kuwait to approve such a deal as diplomatic relations between Iraq and its small neighbour remain frosty after Saddam Hussein’s 1990 invasion.
An Iraqi oil official said on Monday Kuwait had given initial approval for the border crossing but gave no date when a final agreement might be reached.
(By Rania El Gamal, Editing by Michael Christie and Anthony Barker)