In a few weeks, Iraqi officials will begin a plan to auction off their oil contracts to foreign oil giants.
The plan would give oil giants the chance to bid on contracts of voluminous amounts of oil. It is designed to rejuvenate Iraq’s economy and substantially boost oil production in the abundantly rich region.
In an article published in the Wall Street Journal, Gina Chon noted the probable reaction from the oil giants.
‘Despite security risks, Western oil companies are clamoring to get in,’ Chon said. ‘Iraq is still relatively unexplored, offering big companies a potentially easy-to-tap source of growth.’
Fierce bidding among oil giants should create an interesting competition. Interested companies who are permitted to bid include Exxon Mobil Corp. and Royal Dutch Shell PLC. Available reserves are believed to be more than 40 billion barrels.
The possibility of striking these deals has great potential to lower fuel prices, but leaves concern for whether oil giants will throw green energy plans to the wayside to fund this operation. Iraqi oil officials already plan to set up contracts containing requirements of substantial capital investments up front.
Oil Minister Hussain al-Shahristani explained some of the stipulations to these deals.
‘Some of the terms are particularly beneficial to Iraq; winners of the auction must fork over millions of dollars of cash in up front loans to the government,’ Shahristani said.
Required investments will be more than pocket change to oil giants, especially in consideration of market conditions, taxes and obligation to the government for alternative energy research. Despite plans created by the Obama administration, oil giants have done little to go green or meet their goals.
Shell is behind the curve in alternative energy research and green developments. In an article published April 7 in The New York Times, Jad Mouawad wrote about the lack of effort from the oil giant.
‘Royal Dutch Shell said last month that it would freeze its research and investments in wind, solar and hydrogen power, and focus its alternative energy efforts on biofuels,’ Mouawad said.
Shell not only planned to freeze its research, but also was selling what green measures they had already taken.
‘The company had already sold much of its solar business and pulled out of a project last year to build the largest offshore wind farm, near London,’ Mouawad said.
The winning bidder is still unsure, but regardless, our country will benefit in the long run from continued research and new technology. We only prolong our dilemma by buying time – or more oil in this case.
Andrew Taylor is an economics junior and may be reached at [email protected]
