August 2, 2010American base in Basra on frontline of oil boom
Contingency Operating Base Basra, Ieaq - Oil executives buzz in and out of this American base, the former British base connected to the Basra airport, some for meetings with officials, some staying the night – or longer.
The American mission in Basra, Iraq’s oil capital, is perhaps unlike that of any U.S. outpost in the world: to ensure the world’s largest oil companies have as few problems as possible as they start work on Iraqi oil contracts that could see the country become the largest producer ever.
It’s also a tricky prerogative, considering the country’s lack of weapons of mass destruction but abundance of oil, which only bolsters the claims of those who say economic bounty was the motive for the U.S.-led invasion.
Of the 18 firms that formed winning consortiums for 11 oil development deals over the past year, only two were American companies. Yet the U.S. military presence in Iraq and the State Department has been ordered to help.
“U.S. government policy at this time is that the USG in Iraq should assist in facilitating the mobilization of these companies without regard to the nationality of the companies,” said Kenneth Thomas, head of the energy and transportation section of the Basra Provincial Reconstruction Team, a U.S. Embassy initiative. “If more American companies come into Iraq, we will of course assist them in any way we can.”
For the Americans – and the British, who maintain a consulate on the base and rent space to the two British oil companies awarded deals – it’s a hyper-inclusive distillation of their goals around the globe: sow peace through the free market. The PRT especially, while not providing lodging, is a bridge between the needs of the foreign companies and the Iraqis, sometimes acting simply as a facilitator.
Lt. Col. Ralph Kauzlarich, who oversees American efforts to build services and capacity in southern Iraq out of COB Basra, said the facility is set perfectly to support companies working on Rumaila, Zubair, West Qurna and Majnoon, the four fields that will be the engine of Iraq’s oil rise.
He said U.S. forces surveying roads and bridges in the oil provinces of Basra, Dhi Qar and Missan as part of their normal missions will be able to turn the data into reports on logistics and road quality for the mass shipments of equipment the foreign companies will bring in.
“There is good coordination going on with all the oil companies and the Basra operational camp,” U.S. Commanding Gen. Ray Odierno told reporters last month. As the U.S. troops wrap up their mission, “we’ll be here to build confidence between the oil companies and the Iraqi security forces.”
At a recent closed-door roundtable organized on the base by U.S. Ambassador to Iraq Christopher Hill, top foreign diplomats, oil executives and Basra oil and government officials ate lunch while troubleshooting problems the companies face: from entry visas to inadequate cargo space at the ports to difficulties opening up secured bank accounts where billions of dollars will need to be deposited.
Four decades ago, when the same global oil companies – or their predecessors before mergers and takeovers – were kicked out of the country, such problems would be a dream. To an extent, it’s a surprise to be let back in. Since finding oil in northern Iraq in the 1920s, a cartel of private oil companies held a half-century monopoly over Iraqi oil, paying the country pennies on the barrel and intentionally shutting in production to boost the value of their non-Iraqi oil assets.
But even Iraq’s staunchly nationalist oil unions – who have braved arrest warrants and Iraqi security forces in protesting, among other grievances, a draft oil law they feared was too generous to foreign oil companies – have said they support the return of the world’s oil behemoths.
The international firms are expected to bring technology, training and expertise that Iraq’s once-modern oil sector lost over the past three decades of wars, sanctions and misuse by a dictator, ultimately increasing Iraq’s oil production capacity from about 2.6 million barrels per day (bpd) to more than 12.5 million bpd within seven years.
“You’re talking about doubling, tripling, quadrupling Iraqis’ revenue over the next 3 to 8 years,” Odierno said, adding that foreign companies will have security if Iraqis see jobs and other investments that improve their quality of life.
Lack of regular electricity, clean water and health care top the list of Iraqi concerns, which increase in volume as citizens wait for a new government nearly five months after a national election and as the country’s level of violence, though generally lower than at any time since 2004, remains unacceptable.
“There is a need for sufficient security so that economic development can take root. Once it does it creates security,” said Maj. Gen. Vincent Brooks, the commander of U.S. forces in southern Iraq, kicking dust during a recent tour of the Rumaila oil field, which was awarded to BP and the Chinese National Petroleum Corp. to develop.
As more than 50 diplomats, soldiers, oil company executives and field workers were given a tour by the head of BP’s Iraq operations, in the background the rig, operated by U.S. oil services firm Weatherford, was being dismantled and moved elsewhere in the field, having days earlier successfully reached its pay zone. Rumaila, within six years, is supposed to produce 2.85 million bpd, making it the second-largest producing oil field in the world.
Today, Iraq earns 95 percent of its state income by selling oil – nearly $27 billion so far this year. Brooks said Iraq eventually needs to diversify its economy to agriculture and other industries so it’s “not so dependent upon oil markets, oil prices.”
“Without oil it’s difficult to do all these things,” said Brooks, “so it’s appropriate it receives this focus.”
He said COB Basra is offering temporary assistance to companies in need of housing, especially during the hiring process and ongoing contractual talks. “The oil companies want to be in the field,” he said.
BP, CNPC and the state South Oil Company recently formed the Rumaila Operating Organization and will soon move their major presence from the base to a basecamp in the field. Until then, they operate from a massively fortified compound of concrete and steel which houses both the trailers used as living quarters and the office space where drilling plans are being worked up. Al-Jazeera International was on the TV screen during a recent tour of the office and living space. Royal Dutch Shell is in similar digs within the same barn-shaped protective structure.
“As far as I know, this is the only place in the world where the British Government is renting out (bombproof) accommodation to British business for their own safety!” Basra-based UK Consul General Alice Walpole wrote in an email interview. “Our Consulate is certainly the meeting place for many international companies, not all of them British.”
Italian firm Eni is building a camp near the Zubair field, which they will operate along with junior partners Occidental Petroleum from the United States and the Korean Gas Corp. Walpole said Weatherford and Schlumberger, another services company, used to have a presence on the base. But as the oil companies move from the base to the field, “I’m seeing their places taken on the base by the service providers coming in their wake (de-mining companies, lawyers, insurance brokers, medical services, etc),” she wrote.
Exxon Mobil and Russian firm Lukoil are among the seemingly strange bedfellows with temporary work and sleeping arrangements on the base.
Chinese companies were staying with either private security contractors or a logistics firm that rents space at COB Basra, according to sources at the base. They said a minor diplomatic firestorm ignited when American officials were told of this, sparking worries of a potential state secrets threat from within.
Three Chinese and two Russian companies won a role in five of the 11 oil deals Iraq signed, and the U.S. mission, though typically assisting American firms, has an open-arms policy.
“That means CNPC and Lukoil,” the PRT’s Thomas said. “I don’t have a prohibition (from talking to Chinese).”
“But we are not going to assist an Iranian company. Let me be clear on this.”
Walpole said the consul in Basra is doing what it does around the world, helping British companies “identify opportunities, understand the local politics and business culture, and make local contacts.”
“Of course, there are significant differences from most markets: e.g., the unfamiliarity of the local authorities/business community with the modern global marketplace, and the security challenges,” Walpole wrote. “So, yes, right now we play a really prominent role in introducing our Iraqi contacts and the international business community to each other.”
U.S. officials are adamant that the draw-down from about 70,000 troops to zero within 16 months is all but guaranteed, and the transition is ongoing to install a series of consulates supporting the embassy in Baghdad.
If that presence takes up a role resembling other U.S. diplomatic posts around the world, it will continue to focus its attention on boosting American business in the country. And for the foreseeable future, Iraq’s business is oil and gas.
“The development of Iraq’s oil resource is so important to Iraq,” said the PRT’s Thomas, “and Iraq’s general success is so important to the United States.”
