Iraqi oil: Once seen as U.S. boon, now it’s mostly China’s
The United States, with its own homegrown energy bonanza, isn’t going after the petroleum that lies beneath Iraq’s sands nearly as aggressively as is China.
WASHINGTON — Ten years after the United States invaded and occupied Iraq, the country’s oil industry is poised for a boom that would make the troubled nation the No. 2 oil exporter in the world. But the nation that’s moving to take advantage of Iraq’s riches isn’t the United States. It’s China.
The United States, with its own homegrown energy bonanza, isn’t going after the petroleum that lies beneath Iraq’s sands nearly as aggressively as is China, a country hungry to fuel its rise as an economic power.
Iraq remains highly unstable in terms of security, infrastructure and politics. Chinese state-owned oil companies appear more willing to put up with that than Americans.
“The Chinese have a higher tolerance for risk,” said Gal Luft, a co-director of the Institute for the Analysis of Global Security, a Washington research center focused on energy.
The International Energy Agency expects China to become the main customer for Iraq’s vast oil reserves. Fatih Birol, the agency’s chief economist, recently said, “A new trade axis is being formed between Baghdad and Beijing.” Birol said about 80 percent of Iraq’s future oil exports were expected to go to Asia, mainly China.
Iraq’s potential for oil production is huge. The International Energy Agency predicts Iraqi production will more than double in the next eight years and the country will be by far the largest contributor to growth in the global oil supply during the next two decades. By the 2030s, the agency expects Iraq to become the second-largest global oil exporter, overtaking Russia.
U.S. oil companies, in the meantime, are “barely active” in Iraq, said Robin Mills of Dubai-based Manaar Energy Consulting. There’s Exxon Mobil, which is locked in a dispute with the Iraqi government and is looking to sell at least some of its stake in the giant West Qurna-1 oil field, with the state-owned PetroChina discussed as a likely buyer. The other U.S. firm operating in Iraq is Occidental Petroleum, Mills said, a company that has just a minority, nonoperating stake in the Zubair oil field.
Iraq hasn’t become the bonanza for big Western oil companies that some might have expected when the U.S. invaded 10 years ago. It’s a different story, though, for the U.S. oil-field services and engineering companies that have established dominant positions in Iraq. That includes Halliburton, the company Iraq war booster Dick Cheney led before he became vice president.
Bush administration officials suggested shortly after the invasion that revenue from Iraq’s oil fields could largely pay the cost of rebuilding the country. That turned out to be wrong, and $60 billion in U.S. taxpayer funds ended up going into the reconstruction of Iraq. The war devastated Iraq’s oil industry, as kidnappings, sabotage and attacks on infrastructure made it virtually impossible to do business.