What will be the future role of Iraqi oil?

Many have claimed that the Iraq War was fought to satisfy the West's insatiable thirst for oil. However, that theory has been mainly grist for the politicians and the overly sensational supermarket tabloid press. There has been sufficient elasticity in world production capacity to maintain supply channels whether Iraq's wells were flowing or not. Witness what occurred in the winter of 2000 when Saddam, in a snit about UN sanctions, shut in his production to teach the world a lesson. One would surmise that taking about 3 MMb/d of oil off the market would cause an immediate and severe price spike. In fact, the opposite occurred, as OPEC quickly moved to fill the gap. Saddam's plan backfired.

So it comes down to this. While oil may not have been the cause of the Iraq War, despite the howlings of the activists, it may well be the salvation of post-war Iraq. It is clear that the coalition forces exercised remarkable constraint in target selection and media images notwithstanding, the infrastructure of the country - roads, bridges, wells, production facilities and pipelines - have barely suffered any damage. Cooler heads prevailed, and the troops charged with destroying the giant oil fields at Kirkuk and Basra only made token efforts to comply with their orders. Almost before the last shots were fired, all the fires were out and the explosive charges strapped to the wellheads were defused.

So, with the Iraqi oil industry's assets virtually intact, the country is on the brink of a critical decision. They can choose to sink in a morass of infighting about how to resolve the political or legal issues surrounding resumption of production, or they can choose to swim to safety on a river of oil. For the most part, their great national treasure is intact.

According to a report published by Malcolm Brierley and Geoff Eyre of Bayphase Ltd., in Camberly, UK, Iraq is sitting on more than 331 billion bbls of oil and between 322.5 and 323.9 Tcf of natural gas. Discovered, but as yet non-producing, fields outweigh producing fields two to one, and there are more than 350 prospects for exploration or enhanced recovery.

To be sure, considerable capital investment will be required to pave the way to industry recovery, but with President Bush calling for an end to the US sanctions, and Saddam's recalcitrance out of the politics, it's possible for Iraq to turn their huge cash-generating engine into the national lifeboat. And positive results may be experienced sooner than later since the outflow of cash for weapons, military supplies and lavish palaces has stopped.

We will find out soon enough if world public opinion, so vocally opposed to the war, can turn to supporting the peace by focusing on the political and legal impediments that could damage or unnecessarily drag out the recovery process. The UN has proven to be ineffective, but a properly constituted business coalition could have Iraqi oil up and running just as fast as the military coalition shut it down. Taking responsibility for making this happen could be the key factor in winning the peace.

Is it overly idealistic to think that a business coalition can take charge of rebuilding Iraq's oil industry to provide the cash needed to rebuild the nation? Can such a force operate independent of all the anticipated political and religious positioning? Is there a true leader out there who can see that the most expedient way to resurrect Iraq is to convince the people to put aside their differences for a moment and take a bootstrap approach?

The market is there, the technology exists, and investment capital is available. Who will take the first stroke in the swim into Iraq's future?


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