The conundrum of Iraq's black gold: Who will fill ExxonMobil's shoes?

2021-12-22 23:47

Shafaq News / Whilst US-based oil services companies certainly profited greatly from Iraq opening up to international investment after the 2003 invasion, upstream-focused companies failed to find themselves in the oil bonanza they were purported to be in. After less than 20 years, there seems to be an almost complete exodus of US oil companies in Iraq; demotivated and eager to exploit other opportunities, they all have sought to let go of the Iraqi dream. Being at loggerheads for quite some time already, the last of the Mohicans, ExxonMobil, is on its way out of Iraq, with the bewildered Iraqi Ministry of Oil in a state of disarray; shall it seek an equally experienced alternative? or bid on a home-grown company to take over?

ExxonMobil declared its intention to quit the West Qurna/1 field in April, three months after informing Iraq of its intention to sell its 32.7% operating stake to China's National Oil Firm, which also owns 32.7%, and the Chinese C-nooc company.

Other partners in the field are Japan's Itochu with 19.6%, Indonesia's Pertamina with 10%, and the Iraq National Oil Company with 5%.

However, Iraq rejected the deal and wanted to replace ExxonMobil with another U.S. company that is no less prominent than it.

Ethics of the West

" What Western firms do is make real investments that create real value for the country, build society, and raise the level of ethics," Iraqi Oil Minister Ihsan Abdul Jabbar told Shafaq News Agency.

"Other companies are good at work, but they do not meet all of these requirements," he said, adding that the ministry is attempting to bring in the most productive companies, capable of implementing projects at the lowest possible cost, and with the highest possible revenues.

Since then, the Oil Ministry has sought to replace ExxonMobil with another U.S. company, with Basra Oil Company on the Line, demanding that the ministry acquire ExxonMobil's stake in the field.

Basra Oil Company its motives to acquire ExxonMobil's stake, "Basra Oil Company's participation in the West Qurna/1 field will increase the company's profitability while decreasing the presence of international oil companies."

The company cited its expertise in the Zubair oil field, as well as its program to produce 250,000 barrels per day in the Majnoon field, as proof of its ability to replace ExxonMobil.

ExxonMobil’s replacements

Iraq also wants to introduce another U.S. company to acquire ExxonMobil's stake, Halliburton Oil Company, to become an exploration and production operator, as the latter has already participated in discussions to acquire ExxonMobil's stake.

On the sidelines of the Iraq International Book Fair, Oil Minister Ihsan Abdul Jabbar stated, "The ministry has two alternatives after ExxonMobil leaves the oil field." The first option is that the Basra Oil Company buys ExxonMobil's share after expressing its desire to do so, to be a partner in financing the project like it did in the Zubair Oil Field.

He noted that the Basra Oil Company has obtained preliminary approval from the Ministry, pointing that the subject was put to the Council of Ministers to get approval. However, the second option is hiring Halliburton Company, which also wants to replace ExxonMobil.

East-West Balance

"By granting and restricting the sale of ExxonMobil's stake in the West Qurna/1 field to a U.S. company, Iraq is trying to find some kind of balance between U.S., Western and Chinese companies", oil expert Hamza al-Jawahiri told Shafaq News agency.

"Western and American companies' work in investing in oil fields results in a good performance and better technology, and it differs from the performance of Chinese companies and others from East Asian countries, except Japan," al-Jawahiri said, adding that countries such as China sometimes impose conditions to bring labor from their countries to certain services that do not require technical skill and prices higher than local workers.

"The criterion for selecting American or local companies to develop Iraqi oil fields is the economic factor, by measuring the operational cost of the field. If it is an approach to ExxonMobil's operational cost, it is better to have American companies develop and produce the field because the latter can use modern technology and find high-end business values and business systems," al-Jawahiri continued.

In conclusion, choosing a U.S. oil company is the first step in determining the best investment environment for those companies following Exxon Mobil's exit.

https://shafaq.com/en/Report/The-conundrum-of-Iraq-s-black-gold-Who-will-fill-ExxonMobil-s-shoes