The Politics of Oil

The Anglo-Persian Oil Company had been formed by W.K.D'Arcy in 1909 to exploit a piece of land which he had been granted by the Shah in 1901, and the Abadan refinery produced 273,000 tons of oil in 1914, its first year of operation. Anglo-Persian remained the sole oil producing undertaking in the Middle East until 1927; its operations were first confined to Persia itself and then extended to the Naft-Khana fields on the former Persian territories transferred to the Ottoman Government as a result of the Perso-Turkish Frontier Commission of 1913. The oil boom of the 1970s brought wealth to Baghdad, and the city was developed on an impressive scale. New infrastructure including modern sewerage, water, and highway facilities were built during this period.

Recently, there has been a long standing dispute within Baghdad with Iraq’s Kurds over the ownership of the oil in their semi-autonomous enclave within the city.  This is threatening the efforts to rebuild the neglected oil and gas industry that Baghdad profited from in earlier times.  This would restore all of Iraq to a point of prominence as an energy producer.  The city of Baghdad has said that the State Oil Marketing Organization is the only authority with the right to export crude oil.  They have begun cutting supplies of some refined products such as kerosene and diesel fuel to Kurdistan.  The problem continues to fracture the Baghdad area, but it seems the Kurds are beginning to lose ground in the argument.  Baghdad is now the site of oil field auctions and big oil companies from the US, China, and other large energy consuming countries are bidding for the fields. There is a huge international interest in Iraq’s oil due to the fact that they have highly favorable costs of extraction- as low as $1 per barrel. Many national leaders believe that Baghdad’s reserves are the last great reservoir of cheap oil in the world. 

Iraq’s Oil Minister, Hussain al-Shahristani believes that they have 200 billion barrels of crude reserves in addition to the confirmed 112 billion barrels of reserves. If this is true, astonishingly, this would move Iraq ahead of Saudi Arabia in regards to global petroleum importance. Companies such as BP, Shell and Exxon are monitoring this situation carefully as they could be strongly benefitted in the future due to the oil in Baghdad. Many international corporations are establishing operations in Erbil instead of Baghdad to establish a stable environment, alleviate security threats and the cost of security. A new Iraqi law allows investment in Iraq including 100% ownership of capital, guarantees against nationalization and freedom to transfer profits, interest and dividends abroad.

Foreign investment in Iraq between 2003 and 2004 was centered on oil and gas agreements along with major infrastructure projects contracted by the United States to private companies. Due to the relative stability of the last few years, foreign investment in Iraq has surged nearly 1,500% from 2007 (2.7 billion) to 2009 (42.9 billion). Baghdad is on the cusp of transforming its urban landscape over the next few years, but these projects are just being funded. Most haven’t even begun construction, much less completion.
To view a video of the the Oil Empire History Knowledge of Iraq/Iran click here. 

Sources:

http://www.upi.com/Science_News/Resource-Wars/2010/09/22/Baghdad-and-Kurds-battle-over-oil/UPI-15261285180529/

http://www.ameinfo.com/116499.html

http://www.reuters.com/article/idUSGEE5B92EQ20091211