Untitled Document
Based on an inappropriate contractual model imposed by the U. S. State Department,
Iraq stands to lose, on the assumption of an oil price of $40 per barrel and
from only the first 12 oilfields to be developed, between $74 billion and $194
billion over the lifetime of the proposed oil-development contracts.
Oil company rates of return would range from 42% to 162%, rather than the usual
industry minimum target of around a 12% return on investment. The type of contract
is called a 'production sharing agreement', and is in use in no comparable oil
fields (in fact such contracts are in use with respect to only 12% of world
oil reserves, a number which is likely to decline as Russia stops using them).
The paper
"Crude Designs: The Rip-Off of Iraq's Oil Wealth" by Greg Muttitt
describes all the gory details (see also here
and here
and here
and here,
and for Platform, the producer of the report, here),
and proposes some logical alternatives
for the government of Iraq to consider. The most sensible way by far is for
the Iraqi government to develop its own oil industry, and ignore the parasite
oil companies. We are seeing the
beginnings of the Iraqi resistance. The huge danger, or course, is that
the current Iraqi politicians will be bribed into signing long-term agreements
which the Iraqi people will never be able to get out of.
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