HAMBURG: Any discussion of the post-war reconstruction of Iraq quickly turns to the country’s potential oil revenues. Even the US administration has indicated that Iraq’s oil wealth can pay the bill for the war’s aftermath.But most oil analysts consider this idea an illusion.
With 15.1 billion tons, Iraq has the third-largest oil reserves in the world after Saudi Arabia and Canada but its contribution to global oil supplies has been modest in recent years.
Under the United Nations embargo Iraq was only allowed to export a limited amount of oil and could make no investments in facilities. At last count, the country’s dilapidated equipment was producing just a little over two million barrels a day, about half as much as 12 years ago.
This level of production cannot be repeated in the near future.
“It will take at least five years for the country to get back up to the amount of oil production it had before the invasion of Kuwait,” said Klaus Matthies of Germany’s World Economic Archives (HWWA).
To reach even this goal, tremendous resources must be pumped into rebuilding the Iraqi oil industry.
“Against the backdrop of enormous reserves, Iraq is the one country in the Middle East with the least exploration,” said the German Energy Information Service (EID).
Estimates for the necessary investment volume vary from 30 to 90 billion dollars in the next few years, depending on how quickly and to what extent oil production is increased.
“It will at any rate be very costly,” said Matthies.
It is also unclear who is expected to foot the bill. UN Secretary General Kofi Annan still has access to a fund of $14 billion in Iraqi oil revenues earmarked for humanitarian purposes.
The country’s national debt is over $100 billion. Aid payments from industrialized countries are to be funnelled into other infrastructure projects such as roads, schools, hospitals and ports.
“The only ones who will be able to invest are the international petroleum companies,” said a spokesman for US oil giant ExxonMobil.
But in order to cope up with this enormous task, even the petroleum giants will have to do a lot of borrowing.
Until now, 27 international petroleum companies have been active in Iraq, excluding US firms, said the International Energy Agency (IEA). Companies are unlikely to make any investments until it becomes apparent how the political future of the country is shaping up.
Without a positive investment climate or clear legal guidelines and lacking a modernized transport network, the Iraqi oil industry will not be able to stand on its own two feet for some time.
This leads HWWA analyst Matthies to say he sees no indications of Iraqi oil flooding the global market any time soon or affecting global price structures.—dpa
