Iraqi Investment Update
A Forbes article published this week provides further insight into the Iraqi oil quandary: “While big oil companies like Shell and Total are biding their time, cultivating relationships with the Iraqi government and patiently awaiting privatization legislation that may never come, smaller wildcatters are beating them to the punch by signing production and exploration deals in Iraqi Kurdistan.” Iraqi Kurdistan has laid out the welcome mat for international oil companies without the approval of the central government in Baghdad. As we covered in Iraqi Oil Investment Strategy Uncertain and Oil Industry Headlines: Sept. 14, the majors have avoided making deals in Kurdistan for fear of missing out on the bulk of Iraq’s vast reserves, which are estimated to be one of the top three largest in the world. In fact, some experts believe Iraq will take the top slot in reserve holdings (currently held by Saudi Arabia) as the territory is thoroughly explored. Waiting on Baghdad seemed like a good idea, since 97% of the nations proven reserves lie outside of Iraqi Kurdistan’s territory. However, the majors seem to be quietly rethinking their strategy. According to the Forbes article, “Over the past two months, there have been signs that larger international companies are tempted by the lure of Kurdistan, whatever the political risk. DNO said on Aug. 22 that ‘a large international oil company had offered $700 million for its Iraqi assets.” For the companies that decide to hold out for an agreement with Baghdad, the future is up in the air. Forbes reports that “According to Credit Suisse analyst Mark Hume, it is still unclear just how long it will take before the majors can feasibly move into Iraq. ‘Some companies think it is two years, some companies think it is seven to ten years, he said.’” Oil legislation recently drafted by Prime Minister Nuri al-Maliki’s national unity cabinet is set to go before Iraq’s parliament this month. Its acceptance or rejection will more clearly define the near-term possibilities for international investment from a legal standpoint. From a security standpoint, things are likely to remain very difficult for years to come.Published Friday, October 12th, 2007 at 6:00 am and filed under Industry News.