[Congressional Record Volume 154, Number 103 (Friday, June 20, 2008)]
[House]
[Pages H5780-H5782]
From the Congressional Record Online through the Government Publishing Office [www.gpo.gov]




                          WHAT'S IT ALL ABOUT?

  The SPEAKER pro tempore. Under a previous order of the House, the 
gentlewoman from Ohio (Ms. Kaptur) is recognized for 5 minutes.
  Ms. KAPTUR. Mr. Speaker, not so many years ago two famous American 
artists, Josh Stone and Dionne Warwick, created a song called, ``What's 
it all about, Alfie?'' Here is how the song began:
  ``What's it all about, Alfie?
  Is it just for the moment we live?
  What's it all about when you sort it out, Alfie?
  Are we meant to take more than we give?''
  On June 19 this week, 2008, the New York Times lead story said quite 
a bit about taking. The headline reads, ``Deals With Iraq Are Set To 
Bring the Oil Giants Back.'' I hope every American reads the lead story 
in the New York Times this week, June 19, a story written by Andrew 
Kramer.
  Here is some of what it says. It says Exxon Mobil, Shell, Total, and 
BP, along with some other companies like Chevron, and a number of 
smaller oil companies, are in talks with Iraq's oil ministry for no-bid 
contracts, I repeat, no-bid contracts to service Iraq's largest fields. 
The no-bid contracts are unusual for the industry. Many experts 
consider these contracts to be their best hope for large-scale 
increases in production over there. And it talks a lot about the 
politics of global oil and how other places like Bolivia and Venezuela 
and Russia and Kazakhstan aren't so friendly to the United States 
anymore as we become totally dependent on imported fuel. And it says 
that the biggest prize everybody is waiting for is the development of 
these new oil fields.
  But of course we have to be careful because these mother lodes are 
threatened by insurgents who don't like the fact that western companies 
are coveting their resources. And here we live in a country now where 
gas is over $4 a gallon. It would be so easy just to take it. And as 
the song says, are we meant to take more than we give?
  Technically, these no-bid deals, more no-bid from this 
administration, are structured as service contracts. As such, they do 
not require the passage of an oil law setting out terms for competitive 
bidding. The legislation has been stalled by disputes among Shiites, 
Sunni and Kurdish parties over revenue sharing and other conditions 
inside that country where their parliament is in turmoil and cannot 
pass a hydrocarbon law. And thus, outsiders come in and are covetous of 
those resources. The whole process is designed to circumvent the 
legislative stalemate. I might say, how convenient. How convenient.
  And so Americans should ponder the connection between our dependence. 
Now almost 75 percent of what people pump into their tanks comes from 
resources from other places, and think about how serious we had best be 
as a country to become energy independent here at home so we can 
restore our independence again because every American family that can't 
afford to drive to work anymore or go on vacation is less free than 
they were a year ago.
  And the year 1998 is very important because that is the year when 
America began importing over half of what we consume. Every year we 
become less and less free.
  It is really sad what is happening in the world. I mourn for my 
country as we approach Independence Day that she is not free. And the 
way we are going to fix this is for Americans to really understand the 
nature of our predicament.
  I would prefer not to send America's finest to wars over oil, but 
that is exactly what we have done. And it will cost upwards of a 
trillion dollars already to pay for their deployment. It is important 
to think about the words to that song: Are we meant to take? I really 
think we are meant to create. The way this country was born out of 
people's highest ideals, to create a Nation that could be self-
sustaining within its own borders without all these interlocking, 
foreign entailments that George Washington warned us about over 200 
years ago. Maybe some Americans have forgotten, but we shouldn't

[[Page H5781]]

forget. We should remember what it means to be free.
  Again, June 19, lead story, New York Times, ``Deals With Iraq Are Set 
To Bring the Oil Giants Back.'' It is required reading for every 
American who has a heart where freedom beats.

                [From the New York Times, June 19, 2008]

            Deals With Iraq Are Set To Bring Oil Giants Back

                         (By Andrew E. Kramer)

       Baghdad.--Four Western oil companies are in the final 
     stages of negotiations this month on contracts that will 
     return them to Iraq, 36 years after losing their oil 
     concession to nationalization as Saddam Hussein rose to 
     power.
       Exxon Mobil, Shell, Total and BP--the original partners in 
     the Iraq Petroleum Company--along with Chevron and a number 
     of smaller oil companies, are in talks with Iraq's Oil 
     Ministry for no-bid contracts to service Iraq's largest 
     fields, according to ministry officials, oil company 
     officials and an American diplomat
       The deals, expected to be announced on June 30, will lay 
     the foundation for the first commercial work for the major 
     companies in Iraq since the American invasion, and open a new 
     and potentially lucrative country for their operations.
       The no-bid contracts are unusual for the industry, and the 
     offers prevailed over others by more than 40 companies, 
     including companies in Russia, China and India. The 
     contracts, which would run for one to two years and are 
     relatively small by industry standards, would nonetheless 
     give the companies an advantage in bidding on future 
     contracts in a country that many experts consider to be the 
     best hope for a large-scale increase in oil production
       There was suspicion among many in the Arab world and among 
     parts of the American public that the United States had gone 
     to war in Iraq precisely to secure the oil wealth these 
     contracts seek to extract. The Bush administration has said 
     that the war was necessary to combat terrorism. It is not 
     clear what role the United States played in awarding the 
     contracts; there are still American advisers to Iraq's Oil 
     Ministry.
       Sensitive to the appearance that they were profiting from 
     the war and already under pressure because of record high oil 
     prices, senior officials of two of the companies, speaking 
     only on the condition that they not be identified, said they 
     were helping Iraq rebuild its decrepit oil industry.
       For an industry being frozen out of new ventures in the 
     world's dominant oil-producing countries, from Russia to 
     Venezuela, Iraq offers a rare and prized opportunity.
       While enriched by $140 per barrel oil, the oil majors are 
     also struggling to replace their reserves as ever more of the 
     world's oil patch becomes off limits. Governments in 
     countries like Bolivia and Venezuela are nationalizing their 
     oil industries or seeking a larger share of the record 
     profits for their national budgets. Russia and Kazakhstan 
     have forced the major companies to renegotiate contracts.
       The Iraqi government's stated goal in inviting back the 
     major companies is to increase oil production by half a 
     million barrels per day by attracting modern technology and 
     expertise to oil fields now desperately short of both. The 
     revenue would be used for reconstruction, although the Iraqi 
     government has had trouble spending the oil revenues it now 
     has, in part because of bureaucratic inefficiency.
       For the American government, increasing output in Iraq, as 
     elsewhere, serves the foreign policy goal of increasing oil 
     production globally to alleviate the exceptionally tight 
     supply that is a cause of soaring prices.
       The Iraqi Oil Ministry, through a spokesman, said the no-
     bid contracts were a stop-gap measure to bring modern skills 
     into the fields while the oil law was pending in Parliament.
       It said the companies had been chosen because they had been 
     advising the ministry without charge for two years before 
     being awarded the contracts, and because these companies had 
     the needed technology.
       A Shell spokeswoman hinted at the kind of work the 
     companies might be engaged in. ``We can confirm that we have 
     submitted a conceptual proposal to the Iraqi authorities to 
     minimize current and future gas flaring in the south through 
     gas gathering and utilization,'' said the spokeswoman, Marnie 
     Funk ``The contents of the proposal are confidential.''
       While small, the deals hold great promise for the 
     companies.
       ``The bigger prize everybody is waiting for is development 
     of the giant new fields,'' Leila Benali, an authority on 
     Middle East oil at Cambridge Energy Research Associates, said 
     in a tlephone interview from the firm's Paris office. The 
     current contracts, she said, are a ``foothold'' in Iraq for 
     companies striving for these longer-term deals.
       Any Western oil official who comes to Iraq would require 
     heavy security, exposing the companies to all the same 
     logistical nightmares that have hampered previous attempts, 
     often undertaken at huge cost, to rebuild Iraq's oil 
     infrastructure.
       And work in the deserts and swamps that contain much of 
     Iraq's oil reserves would be virtually impossible unless 
     carried out solely by Iraqi subcontractors, who would likely 
     be threatened by insurgents for cooperating with Western 
     companies.
       Yet at today's oil prices, there is no shortage of 
     companies coveting a contract in Iraq. It is not only one of 
     the few countries where oil reserves are up for grabs, but 
     also one of the few that is viewed within the industry as 
     having considerable potential to rapidly increase production.
       David Fyfe, a Middle East analyst at the International 
     Energy Agency, a Paris-based group that monitors oil 
     production for the developed countries, said he believed that 
     Iraq's output could increase to about 3 million barrels a day 
     from its current 2.5 million, though it would probably take 
     longer than the six months the oil Ministry estimated.
       Mr. Fyfe's organization estimated that repair work on 
     existing fields could bring Iraq's output up to roughly four 
     million barrels per day within several years. After new 
     fields are tapped, Iraq is expected to reach a plateau of 
     about six million barrels per day, Mr. Fyfe said, which could 
     suppress current world oil prices.
       The contracts, the two oil company officials said, are a 
     continuation of work the companies had been conducting here 
     to assist the Oil Ministry under two-year-old memorandums of 
     understanding. The companies provided free advice and 
     training to the Iraqis. This relationship with the ministry 
     said company officials and an American diplomat, was a reason 
     the contracts were not opened to competitive bidding.
       A total of 46 companies, including the leading oil 
     companies of China, India and Russia, had memorandums of 
     understanding with the Oil Ministry, yet were not awarded 
     contracts.
       The no-bid deals are structured as service contracts. The 
     companies will be paid for their work, rather than offered a 
     license to the oil deposits. As such, they do not require the 
     passage of an oil law setting out terms for competitive 
     bidding. The legislation has been stalled by disputes among 
     Shiite, Sunni and Kurdish parties over revenue sharing and 
     other conditions.
       The first oil contracts for the majors in Iraq are 
     exceptional for the oil industry.
       They include a provision that could allow the companies to 
     reap large profits at today's prices: the ministry and 
     companies are negotiating payment in oil rather than cash.
       ``These are not actually service contracts,'' Ms. Benali 
     said. ``They were designed to circumvent the legislative 
     stalemate'' and bring Western companies with experience 
     managing large projects into Iraq before the passage of the 
     oil law.
       A clause in the draft contracts would allow the companies 
     to match bids from competing companies to retain the work 
     once it is opened to bidding, according to the Iraq country 
     manager for a major oil company who did not consent to be 
     cited publicly discussing the terms.
       Assem Jihad, the Oil Ministry spokesman, said the ministry 
     chose companies it was comfortable working with under the 
     charitable memorandum of understanding agreements, and for 
     their technical prowess. ``Because of that, they got the 
     priority,'' he said.
       In all cases but one, the same company that had provided 
     free advice to the ministry for work on a specific field was 
     offered the technical support contract for that field, one of 
     the companies' officials said.
       The exception is the West Qurna field in southern Iraq, 
     outside Basra. There, the Russian company Lukoil, which 
     claims a Hussein-era contract for the field, had been 
     providing free training to Iraqi engineers, but a consortium 
     of Chevron and Total, a French company, was offered the 
     contract. A spokesman for Lukoil declined to comment.
       Charles Ries, the chief economic official in the American 
     Embassy in Baghdad, described the no-bid contracts as a 
     bridging mechanism to bring modern technology into the fields 
     before the oil law was passed, and as an extension of the 
     earlier work without charge.
       To be sure, these are not the first foreign oil contracts 
     in Iraq, and all have proved contentious.
       The Kurdistan regional government, which in many respects 
     functions as an independent entity in northern Iraq, has 
     concluded a number of deals. Hunt Oil Company of Dallas, for 
     example, signed a production-sharing agreement with the 
     regional government last fall, though its legality is 
     questioned by the central Iraqi government. The technical 
     support agreements, however, are the first commercial work by 
     the major oil companies in Iraq.
       The impact, experts say, could be remarkable increases in 
     Iraqi oil output.
       While the current contracts are unrelated to the companies' 
     previous work in Iraq, in a twist of corporate history for 
     some of the world's largest companies, all four oil majors 
     that had lost their concessions in Iraq are now back.
       But a spokesman for Exxon said the company's approach to 
     Iraq was no different from its work elsewhere.
       ``Consistent with our longstanding, global business 
     strategy, ExxonMobil would pursue business opportunities as 
     they arise in Iraq, just as we would in other countries in 
     which we are permitted to operate,'' the spokesman, Len 
     D'Eramo, said in an e-mailed statement.
       But the company is clearly aware of the history. In an 
     interview with Newsweek last fall, the former chief executive 
     of Exxon, Lee Raymond, praised Iraq's potential as an oil-
     producing country and added that Exxon was in a position to 
     know. ``There is an enormous amount of oil in Iraq,'' Mr. 
     Raymond said. ``We were part of the consortium, the four

[[Page H5782]]

     companies that were there when Saddam Hussein threw us out, 
     and we basically had the whole country.''

     

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