[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.''
____________________