"Foreign companies recognize that as far as Iraqi oil technocrats are concerned, the production risks are minimal, and consequently the kind of terms that will be offered on contracts are not going to be giveaways," Alkadiri said. "The Iraqis will strike a hard bargain."
foreign help needed
But Iraq has long been aware that the challenges it now faces are so formidable that significant foreign help is needed.
Iraq's major oil fields, like Kirkuk in the north and Rumailah in the south, form a belt along the border with Iran and have been producing for decades. Fields still to be explored are in the western desert, near Jordan. Based on data from before the Gulf War, the country has 112 billion barrels of proven reserves. But according to Chalabi, "there are only 15 developed fields out of 73 discovered."
Before the Gulf War, Iraq had a production capacity of 3.8 million barrels a day; that has fallen to about 2.8 million, Chalabi wrote. The fields that are working -- along with the pumping stations, pipelines, refineries and ports -- are in dire need of rehabilitation. That task, industry experts say, will probably be the industry's first priority if Saddam is ousted.
The shortage of parts and technology forced Iraqi oil workers to resort to pumping methods that kept the oil flowing but badly damaged oil reservoirs. Restoration of fields and facilities would be likely to open the earliest opportunities for foreign businesses, analysts said, mainly for oil-field services companies like Schlumberger and Halliburton. In a report in October, Deutsche Bank estimated that about US$1.5 billion would need to be spent at the outset to restore fields that are now producing.
Some critics and supporters of a possible war have said that if the US removes Saddam, Iraq will be compelled to open the taps, causing oil prices to fall sharply. But for oil facilities to be repaired, some might be shut down first, and Iraqi production could actually decline, industry experts said. That reduction of supplies, in turn, might buoy short-term oil prices.
For global oil companies, the true prize would be working on large, new fields -- and Iraq promises plenty of those. Chalabi, in his paper, stated, "Iraq has the potential to produce 4.7 million barrels a day more oil from discovered fields that are ready to be developed."
With the right investments, Iraq could be producing around 6 million barrels a day by 2010, he estimated. Actual production might be lower if Iraq continues as a member of the Organization of the Petroleum Exporting Countries and agrees to lower export quotas to bolster prices.
Yet any new development would require substantial investment, and few experts venture to estimate how much would be needed. And oil companies said they expected the Iraqis to look at the rest of the world to figure out what kind of contracts they should offer foreigners.
According to Mikhail Khodorkovsky, chief executive of Russia's largest oil company, Yukos, the Iraqis could opt to lease fields in blocks, as the Norwegians do. But more likely, he and other experts say, Iraq may look at what its neighbors are doing in the Persian Gulf and take that as an example. If that proves to be the case, international oil companies may have to wait years for favorable terms under which to develop new fields in Iraq.
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