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Iraq’s oil industry after U.S. withdrawal

Scott Tong Dec 30, 2011

Steve Chiotakis: There’s been more violence in Iraq over the past 24 hours. The latest attack in Kirkuk — about 2 hours north of Baghdad — when a roadside bomb went off injuring three people. Now, the violence has ramped up since the last of American troops left the country this month. The war, of course, was certainly divisive here at home. And whatever your opinion, oil played a pivotal role in the war, helping finance reconstruction and a new government.

So how is the oil business in Iraq today, compared to the start of the war? From the Marketplace sustainability desk, Scott Tong reports.

Scott Tong: When we invaded in 2003, Saddam’s Iraq was an OPEC underachiever. Its companies were low-tech, and it faced U.N. sanctions.

Analyst Bhushan Bahree is with IHS Cambridge Energy.

Bhushan Bahree: Production during the ’90s depended on how much the United Nations was going to permit Iraq to export. And Iraq couldn’t buy a lot of equipment and so forth, given the restrictions it had.

Removing Saddam meant possibly more crude, from a place with lots of it.

Michael Makovsky at the Bipartisan Policy Center used to do Iraq oil issues at the Pentagon.

Michael Makovsky: Iraq’s potential in energy is immense. So if there is political stability, the overall trajectory for Iraqi energy is very bullish.

If. The problem is not what’s underground, it’s the above-ground issues: insecurity, attacks on oil facilities, and politics. The new Iraq gave international oil companies tough terms, meaning small profits, says Dubai oil analyst Robin Mills.

Robin Mills: It’s had a long tradition of running its own oil affairs. And it was politically very important to the Iraqi government to say we are not giving our oil away to foreigners.

Mediocre terms attracted firms from places like China, Malaysia, Angola, and Russia. To Makovsky, not exactly a bonanza for the invading countries’ companies.

Makovsky: For those who thought that the U.S. went in to Iraq for oil, that’s been a loser, right if that was the case. Because the U.S. companies have not been getting a greater share of the deals.

Iraqi production has grown to three million barrels a day. Bahree at IHS thinks that could double in a decade, which is good for consumers because global supplies are tight. And:

Bahree: Something is always going wrong somewhere, either because of acts of god, nature, accidents or political issues.

So you could argue we squeezed out some energy security from the Iraq adventure. What you cannot argue is that Iraq’s oil revenue paid for its reconstruction — as was once advertised. That $50 billion came from you and me.

In Washington, I’m Scott Tong for Marketplace.

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