KFDA - NewsChannel 10 / Amarillo News, Weather, SportsMajor oil companies take an unusual gamble in Iraq
Member Center:
Associated Press - June 26, 2009 6:05 PM ET
HOUSTON (AP) - International oil companies poised for a return to Iraq find themselves in an unfamiliar spot, preparing to assist rather than lord over drilling operations -- and taking risks that at first glance don't appear worth the effort.
The bigger risk, however, might be failing to seize whatever opportunity presents itself in a country with the third-largest petroleum reserves in the world.
Iraq desperately needs oil revenue for reconstruction, and it wants to double its daily crude output within four to five years.
On Monday, the country's Oil Ministry is set to auction off service contracts that in total may pay up to $16 billion over 20 years to the dozens of oil companies that have qualified to bid.
To put the potential payout into context, Irving, Texas-based Exxon Mobil on its own posted a $45.2 billion profit last year, earnings generated largely by extracting oil and gas, not taking fees to help others produce it.
When international oil companies agree to work in a country, they're typically awarded a portion of the oil that's pulled from the ground. That's how they produce profits and increase reserves, a vital asset. They don't normally work for fees alone.
In Iraq, however, the goal will be to get their foot in the door and eventually use their vast sums of capital and know-how to wrangle a greater stake in the developments - namely, a share of the production.
Copyright 2009 The Associated Press. All rights reserved. This material may not be published, broadcast, rewritten or redistributed.
