2009's winners and losers in the oil industry

The Iraqi oil auctions. (Getty Images)
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Iraq’s Oil Ministry

To the untrained eye, the recent Iraq oil auctions that resulted in only one field being awarded could be viewed as an unmitigated disaster for Iraq’s oil minister, Dr. Hussain al-Shahristani, and his cohorts in the oil ministry. Indeed the whole situation has led more than one observer to ask how Shahristani has managed to cling onto his job.

However, in what has been a combination of skillful political maneuvering, stubbornness and a touch of luck the oil auctions ended up reinforcing Shahristani’s reputation as a man who is not prepared to allow Iraq’s greatest (some might also add only) assets to be sold off cheaply to foreign oil companies.

Shahristani was undeniably lucky when the only contract to be awarded was the super giant Rumaila field. When at full capacity the 17 billion barrel field will contribute more than half of the 4 million barrels a day Iraq has set as its production target.

The oil minister also managed to persuade a BP-led consortium to accept an offer of US$2 for every extra barrel of oil produced by the field. To put the figure in perspective, an IOC could expect to earn $20 for every extra barrel on an oilfield in the US.

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FEATURED COMMENT I'm not sure the NOCs are out of the woods yet! Nice feature though   1 Comments Read more comments »

Shahristani also showed deft political nous after stating that two gas fields in the auction that had attracted no bids would now be operated by local, state-run companies. Before the auction the oil ministry has been under fire for not giving state-run companies an opportunity to bid for contracts. The gesture had the effect of cutting the protestors off at the knees. 

Iraq knows that it has potentially the second largest oil reserves in the world after Saudi Arabia and it also knows that the oil is going nowhere. Shahristani has sent a loud and clear message to the IOCs that he firmly believes that they need Iraq’s oil more than Iraq needs them.