Mr Jaafari managed in the end to secure approval for most of his original choices after being obliged to leave six posts vacant in the partial cabinet list that he presented to the National Assembly on April 28th. Negotiators from the mainly Shia United Iraqi Alliance (UIA) and its Kurdish allies finally agreed to accept Saadoun Dulaimi, former head of a security-related research centre, as minister of defence, in a bid to bring the restive Sunni community into the fold and undercut the core of support for the insurgency. The Ministry of Oil went to Ibrahim Bahr al-Uloum, who had also filled the position on the US-appointed Iraqi Governing Council (IGC) from late 2003 through to the official handover of sovereignty to the interim government under Ayad Allawi in June 2004.
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Uncertainty over the post of oil minister has been equally unsettling. Mr Jaafari’s choice of Ahmed Chalabi, a deputy prime minister, to occupy the post on an acting basis set alarm bells ringing in some quarters. Mr Chalabi, in his former guise as the Pentagon’s favourite in the lead-up to the war, had been seen as a potential ally of “big oil” in unleashing Iraq’s potential as an OPEC-busting future source of crude oil supplies for the West. However, he has since aligned himself with a wide variety of domestic political forces, and distanced himself from Washington. While not quite strong enough to become prime minister himself, he has become one of the foremost powerbrokers in the new Iraq. Had he taken on the oil ministry on a permanent basis, the fate of Iraq’s strategic industry would have become much more politicised.
Throughout the latest political impasse, one of Mr Chalabi’s top aides was adamant that he would only be heading the ministry for a few days and “would not be making any decisions affecting the future of Iraq’s oil resources”. However, other reports suggested that Mr Jaafari was having great difficulty coaxing the oil portfolio back out of Mr Chalabi’s hands. In any event, large-scale investment in the oil industry is still some way off. Along with the severe security threat, large foreign oil companies will probably want some assurance of a friendly regulatory environment. This will require a close review of the ownership of resources, and the way in which oil exploration and production contracts fit in with this, during the upcoming constitutional talks.
Mr Bahr al-Uloum will find the oil sector in a worse state than when he left it almost a year ago, although this is mainly because of the continued violence and protracted political wrangling, rather than any action by the outgoing minister, Thamer al-Ghadhban. Oil production is down to about 1.8m barrels/day (b/d), exports are still mainly restricted to the Basra oil terminal in the south, and domestic refining and distribution are blighted by sabotage and rampant smuggling. Of the three oilfield development contracts put out to tender during Mr Bahr al-Uloum’s first stint in office, one has been awarded to a comparatively unknown Turkish/UK venture, the second has been let provisionally to a Canadian firm and an award on the third has been held up pending the completion of the new cabinet. The first two--Khurmala Dome and Hamrin--are both located in the north, posing logistical problems for the supply of materials and mobilisation of local contractors. The third, Subba/Luhais, is in the south, where operating conditions are easier. The three projects offer the prospect of increasing Iraq’s production capacity by about 300,000 b/d toward the end of 2006. However, even supposing improved security conditions allow the government to increase output from existing fields, the recovery of Iraqi production capacity to the pre-war level of 2.6m b/d is still a long way off.
http://www.viewswire.com/index.asp?layout=display_article&search_text=ViewsWire&doc_id=708272270
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