Exxon back in Iraq —ANWR next?

Bill Weinberg

What a telling medley of articles in the New York Times June 19. First this, from the front page:

Deals With Iraq Are Set to Bring Oil Giants Back
BAGHDAD — Four Western oil companies are in the final stages of negotiations this month on contracts that will return them to Iraq, 36 years after losing their oil concession to nationalization as Saddam Hussein rose to power.

Exxon Mobil, Shell, Total and BP — the original partners in the Iraq Petroleum Company — along with Chevron and a number of smaller oil companies, are in talks with Iraq’s Oil Ministry for no-bid contracts to service Iraq’s largest fields, according to ministry officials, oil company officials and an American diplomat.

The deals, expected to be announced on June 30, will lay the foundation for the first commercial work for the major companies in Iraq since the American invasion, and open a new and potentially lucrative country for their operations.

The no-bid contracts are unusual for the industry, and the offers prevailed over others by more than 40 companies, including companies in Russia, China and India. The contracts, which would run for one to two years and are relatively small by industry standards, would nonetheless give the companies an advantage in bidding on future contracts in a country that many experts consider to be the best hope for a large-scale increase in oil production.

There was suspicion among many in the Arab world and among parts of the American public that the United States had gone to war in Iraq precisely to secure the oil wealth these contracts seek to extract.

Oh please, spare us the far-fetched conspiracy theories. Next this, also on the front page, just one column over:

Dearth of Ships Delays Drilling of Offshore Oil
As President Bush calls for repealing a ban on drilling off most of the coast of the United States, a shortage of ships used for deep-water offshore drilling promises to impede any rapid turnaround in oil exploration and supply…

Mr. Bush called on Congress Wednesday to end a longstanding federal ban on offshore drilling and open the Arctic National Wildlife Refuge for oil exploration, arguing that the steps were needed to lower gasoline prices and bolster national security.

In other words the Iraq invasion a.) allowed Exxon and their ilk to get back into Iraq after more than a generation, and b.) sparked the oil shock—thereby creating the necessary climate for them to get back onto the Florida Coast, and ultimately into ANWR. Tell us again how the war is not about oil? Finally, just to remind us of OPEC’s perennial role in the propaganda system as flack-catcher for the other cartel (Exxon & ilk), this from the op-ed page, by former Reagan/Bush advisor Thomas Evans:

Sue OPEC
THE president of the United States has the power to attack, and perhaps destroy, the Organization of the Petroleum Exporting Countries, the illegal cartel that has driven the price of oil over $130 per barrel. This can be accomplished without invasion or bombing. No special legislation is needed. The president need simply allow the states to seek relief in the Supreme Court under our antitrust laws.

The oil ministers of the OPEC countries meet periodically to set production quotas for the cartel’s members and in the process establish an artificially high price for crude oil. Under our antitrust laws, this is illegal…

Despite this illegal conduct, not everyone can sue OPEC and succeed. In 2002, a federal court dismissed a class-action lawsuit brought against OPEC by a gas station owner. An appeals court agreed…

Fortunately, there is another way to sue OPEC. Even if actions by individual citizens fail, a seldom-used provision of Article III of the Constitution grants original jurisdiction to the Supreme Court over lawsuits brought by states against “foreign states” and, as expanded by the United States Code, over “aliens.”

The attorneys general of the various states should sue OPEC as an alien or, pleading alternatively, as a foreign state…

If the president allowed the states to sue OPEC, his actions would undoubtedly anger political leaders in the Middle East and create the need for diplomatic initiatives to limit the fallout. But how stable is the Middle East right now? And isn’t starting a lawsuit better than starting a war?

The war started five years ago—or seven if you include Afghanistan. The price hike is the fruit of this destabilization. OPEC (in contrast to the situation in 1973) is pumping the stuff out of the ground like crazy. Yet it still serves as a convenient scapegoat for the real masterminds of the contrived crisis.

See our last posts on Iraq, the struggle for Iraq’s oil, the struggle for global oil, and the struggle for Alaska.

  1. Anatomy of the offshore restrictions
    The New York Times June 26, in “Parties Split on How to Expand Offshore Drilling” (note use of “how,” not “whether”), helpfully provides a little explanation of what exactly the industry and their Republican allies are seeking to overturn:

    Republican legislators have argued in Congress this week that the United States is pleading for more oil from foreign producers while keeping most of its own coastal territory off limits to drilling. Democrats are trying to trump that argument by pointing to existing leases in the Gulf of Mexico that they believe companies have been slow to exploit.

    It is far from clear, however, that expanded coastal drilling would produce any drastic change in the American oil situation, even over the long haul.

    The biggest problem is that much of the coastal United States, subject to a drilling ban since the early 1980s, has not been thoroughly explored for oil. Neither the industry nor the government has any definitive idea how much could be recovered. In order to hazard a guess for some areas of the Eastern Seaboard, the government has had to inspect geological maps from Morocco, which was connected to North America more than 100 million years ago.

    The Republican argument is based on the assumption that drilling in areas that are now under moratorium — the Atlantic coast, almost all of the Pacific coast and Gulf of Mexico waters adjacent to the Florida coastline — could prove to be as productive as in offshore areas where leasing and drilling have been going on for decades.

    Only about 20 percent of the continental shelf is open for drilling, providing about 27 percent of domestic oil production and 14 percent of natural gas production. Republicans say that modern seismic work and drilling in deep waters in the central Gulf of Mexico have meant a sixfold increase in estimates of the oil there, and they believe that would happen again if exploration were expanded.

    Representative John E. Peterson, Republican of Pennsylvania, is leading the House forces in favor of offshore drilling. He said opening more areas would cut down on fear and speculation in the oil markets.

    Most oil companies support the Republican position and are particularly eager for access to the eastern gulf, noting that the water in some parts of it is shallow and drilling would be easy.

    “These areas have potential, and we really need to find out what is out there,” said Stephen J. Hadden, senior vice president for exploration and production at Devon Energy, a major gulf producer. “We’re encouraged the dialogue is now occurring, and people are asking the hard questions as to why this is off limits.”

    Supporters of the Republican position put estimates for potential oil production from new areas at 1 million barrels a day or more. That would be a notable improvement in domestic production, of about 5 million barrels a day. The United States consumes more than 20 million barrels of oil a day, importing most of it.

    Democrats call the Republican estimates inflated, and some independent analysts agree.

    David Kirsch, an oil analyst at PFC Energy, a consulting firm, said that if the most promising areas off Florida and California were opened for drilling, their peak production in a decade could be as little as 250,000 barrels a day — less than a quarter of what the gulf produces now.

    “It’s almost a desperate attempt to take advantage of the political climate brought on by high energy prices to steamroll through legislation that won’t fundamentally address those high energy prices,” Mr. Kirsch said.

    “Almost”? Also, as we have noted, Mexico’s own restrictions on offshore exploitation in the Gulf are set to expire in two years—and US corporations are pushing to get in on that bonanza too. If they get the whole hog both sides of the line, what a free-for-all we’re gonna be looking at in the years to come…

  2. Bush throws down gauntlet on offshore drilling
    From Oil & Gas Journal, July 14:

    WASHINGTON, DC — Responding to congressional Republicans’ calls that he make the first move, US President George W. Bush has lifted a presidential ban on leasing oil and gas acreage on the US Outer Continental Shelf.

    “It’s been almost a month since I urged Congress to act, and they’ve done nothing,” Bush said in a July 14 statement. “They’ve not moved any legislation. And as the Democratically-controlled Congress has sat idle, [gasoline] prices have continued to increase,” he added.

    “Failure to act is unacceptable. It’s unacceptable to me and it’s unacceptable to the American people. So today, I’ve issued a memorandum to lift the executive prohibition on oil exploration in the OCS. With this action, the executive branch’s restrictions on this exploration have been cleared away. Now the ball is squarely in Congress’s court,” Bush continued.

    Congress still has to repeal moratoriums it has placed on 85% of the OCS before leasing can take place. House and Senate reactions generally followed party lines as most Republicans applauded the president’s action and most Democrats condemned it. “The Bush plan is a hoax. It will neither reduce [gasoline] prices nor increase energy independence. It just gives millions more acres to the same companies that are sitting on nearly 68 million acres of public lands and coastal acres,” House Speaker Nancy Pelosi (D-Calif.) said.