Power Plays: Massive Iraqi oil reserves -- Fact or fiction?

WORLD ENERGY WATCH
edited by Gloria Lalumia

The World Energy Watch presents recent news and analysis highlighting the activities of the players involved in the power struggle for the world's remaining energy resources

IS THE STORY OF ‘MASSIVE UNTAPPED OIL RESERVES' FACT OR FICTIONS? (Azzaman in English, Iraq)

Note: The writer, Sharif Ali, is an expert in Iraqi oil reserves and served as a director-general at the Oil Ministry.

The restive Province of Anbar grabbed the headlines of world media recently. But the news, fortunately, was not related to the ongoing violence and ferocious resistance of U.S. occupation the province has been reputed for in the past four years. Suddenly, world media focused their attention on significant oil reserves of 100 billion barrels. And where? In the western desert and specifically in Ramadi Province.

The reports ostensibly left no doubt that the province sits on gigantic oil fields which, if exploited, would place Iraq ahead of Saudi Arabia as he world's top oil producer. The reports were based on a study by energy analysts I.H.S. The figures took Iraqi oil experts and analysts by surprise and they have their own reasons to be suspicious of the estimates and the timing of their announcement. ...

The province, the scourge of U.S. invasion troops, is inhabited by 1.3 million people and more than 95 percent of its land is barren desert. Iraq Petroleum Company (IPC) carried out seismic surveys of the province and dug numerous oil wells between 1955 and 1961. The National oil Company made its own surveys which continued for over two decades and only came to a halt after the imposition of punitive U.N. trade sanctions in 1990. During the same period major oil firms like ExxonMobil, Japex (Japan Petroleum Exploration), Ascom, Petronas and Repsol made extensive surveys through joint agreements signed with the Ministry of Oil. The reports of all these surveys, which are part of the Oil Ministry's archives, were discouraging and could not come up with categorical results that the western desert, that is the area falling within the provincial borders of Anbar, holds substantial oil or gas reserves. That conclusion was substantiated by an article in MEES, the authoritative Middle East Economic Survey, in a report about the results of 2004 surveys by American geological groups which said the area's oil reserves run between half a billion and one billion and a half of proven reserves.

Brushing all these findings aside, the U.S. energy analysts I.H.S., for reasons yet to be uncovered, reveals surprising and shocking figures of estimates totaling 100 billion barrels. Who are we to believe? Is it logical and sane to doubt the surveys by IPC, the National Oil Company, giant foreign oil firms and recent surveys by U.S. groups and believe the I.H.S?

I.H.S. report smacks of politicization. It was written and made public with the aim of pacifying the violent and restive province by telling its rebellious population it is better for them to lay down their arms and make use of their oil riches under the new oil law and federal system. But the powers that inspired the I.H.S. report forget that one major reason for the Iraqis frustration and disillusionment is the oil law in its current form and the federal system. Whatever oil is there in Iraq belongs to Iraqis as a nation the fruits of which will have to be reaped by the country at large and not its federated provinces.

IRAN, PETROBRAS TO FINALISE OIL DEAL BY SUMMER (The Khaleej Times, United Arab Emirates)

Iran is in talks with Brazil's Petrobras PETR4.SAPBR.N to explore two oil blocks in the Caspian sea and aims to finalise a deal by summer, an Iranian official was quoted as saying on Sunday.

Iran, which is facing mounting pressure from the West to abandon its nuclear ambitions, is seeking to attract foreign investors to help it develop its huge gas and oil reserves. But talks are often protracted and can take a long time to finalise. Mahmoud Mohaddes, director of exploration of the National Iranian Oil Company, told the Teheran-e Emrouz daily $2 billion of foreign investment was needed to develop two Iranian oil fields in the Caspian Sea. The state-owned Brazilian oil company said in March it would make a big push to expand its overseas exploration activities this year to countries like Iran. ‘Negotiations with Petrobras are still going on,' he was quoted as saying at an energy conference in Paris. ‘The contract to explore two ... blocks in the Caspian Sea will be finalised by summer.' State television said it would be Iran's first oil and gas exploration operation in the Caspian Sea. The Iranian summer runs from June 22 to Sept. 22.

TURKEY, IRAN AGREE TO EXPAND ENERGY COOPERATION (Middle East Times, Cyprus)

Turkey and Iran agreed in principle to expand their electricity trade and build dams and power stations, Turkish energy minister Hilmi Guler said Thursday. "We believe we can sign a memorandum of understanding later Thursday," Guler said after talks with his Iranian counterpart Parviz Fattah, the Anatolia news agency reported. The projects include upgrading existing power lines through which Iran sells Turkey electricity and building additional lines, the two ministers said. ... Guler said that they also discussed proposals to build dams and natural gas- or oil-fueled power stations. Fattah invited Turkish companies to look at the possibility of building dams and power plants in Iran. "Iran is completely ready for such investment and cooperation," he said. Trade volume between Turkey and Iran was $6.7 billion in 2006, with the bulk of Iranian sales in the form of oil and natural gas carried via a pipeline linking the two neighbors. Turkey and Iran have notably improved ties over the past several years after an icy period marked by Turkish accusations that Iran was sheltering Turkish Kurd separatists and aiding Islamist extremists.

EU CLINGS TO HOPES OF TRANS-CASPIAN GAS PIPELINE (EUobserver.com, Belgium)

The European Commission still believes Europe can break Russia's stranglehold on Central Asia gas supplies with a Trans-Caspian pipeline, but a new Russian deal and internal EU divisions are hampering the project. "We're still very optimistic about this," a commission spokesman said on Friday (1 June), adding that Brussels will in the "very near future" appoint a high-level "coordinator" such as an ex-commissioner or former European cabinet minister to push the project along. "My gut instinct says yes [it will be built]," an EU official working on the pipeline feasibility study told EUobserver, with experts saying there is probably enough gas in Turkmenistan and Kazakhstan to feed extra volumes to Russia, the EU and even China in future.

The EU pipeline, designated as a "priority project" by EU heads of state at the March summit, is designed to link Europe - via the South Caucasus and Turkey - to Azerbaijan and Iran in the first phase. A second phase, which is crucial in terms of overall financial viability, would add a branch under the Caspian Sea to Central Asia. ... The EU for the past year has worked on a new Central Asia policy designed to pave the way for the Caspian Sea branch. The policy - to be unveiled in June - is to see EU aid double to €750 million by 2013 and a string of new EU embassies in the five Central Asian capitals. But leading Romanian analyst Vladimir Socor says Brussels is in denial over the implications of an 11 May deal between Vladimir Putin and the leaders of Turkmenistan, Kazakhstan and Uzbekistan, which foresees major new Central Asia pipeline links to Russia from 2008 onward. "Russia seems to have conclusively defeated all Western-backed projects to bring oil and gas from Central Asia directly to Europe," Mr Socor wrote for US NGO Jamestown on Thursday (31 May). "EU officials seem disinclined to conduct a what-went-wrong, lessons-learned analysis of these cascading setbacks."

RUSSIAN CHILL CAST DOUBTS OVER NEW OIL INVESTMENT (Gulfnews.com, United Arab Emirates)

A frostier climate for private investors in Russia, holder of the world's largest natural gas reserves, is likely to stop oil firms from pressing ahead with new projects there. BP's Russian venture is facing the loss of the licence for the Kovykta gas field. The move follows Kremlin pressure on projects involving companies like Royal Dutch Shell and Total. "The big oil companies haven't been doing much new in Russia, they have been seeking to hang on to what they've already got rather than signing new deals," said Julian Lee, analyst at the Centre for Global Energy Studies. "Private investors generally are finding life more difficult. There's a lack of clarity for investors."

Russia's vast resources of oil and gas have prompted Western oil firms, facing increasing difficulties in gaining access to large sources of new reserves, to flock to Russia. Now, the companies are finding the climate increasingly tricky and, in a shift in tone, some are indicating that new investment might be shelved. ExxonMobil CEO Rex Tillerson said on Wednesday his company would likely need more clarity as to how Russia plans to treat foreign investors before it considers any new projects there. ... For its part, Russia says it is not singling out foreign investors. "Our approach to foreign and domestic investors is exactly the same," Energy Minister Viktor Khristenko told reporters at an energy conference in Paris on Thursday. While Exxon's Tillerson said the situation needed more clarity, his counterpart at Shell said on January 26 that the company would continue to seek new business in Russia. Jeroen van der Veer told reporters at the World Economic Forum in Davos that Russia had "a lot of oil, a lot of gas and we happen to know something about it. "We will continue to look at all opportunities that we have and might be possible," he added.

Copyright 2007, Gloria R. Lalumia

WORLD ENERGY WATCH

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