Steve Sachs Duke


Friday, July 25, 2003


This war is all about oil... When I mentioned this article in conversation the other day, no one else had seen it--so I thought I'd post it here. In the first oil sales after the invasion, the big winner was none other than France. Turkey, which famously denied U.S. troops access to its bases before the war, also received a significant piece of the action from Iraq's State Oil Marketing Organization. The June 13 Times of London carried the headline "UK misses out as Total gets Iraq oil":

TOTAL, the French oil company, has been awarded a large share in the first sale of Iraqi oil since the recent war.

Iraq's State Oil Marketing Organisation (Somo) has confounded expectations by its decision to include only one US company, Chevron Texaco, and not a single British company among the six that have won a share of the ten million barrels on offer.

The tender, informally announced last week by the Iraqi oil company, drew a huge response, with 52 companies making bids for the eight million barrels of Kirkuk oil stored in Turkey and two million barrels of Basra Light.

Oil traders had speculated that American companies, excluded from Iraq for over a decade by Saddam Hussein's edict, would be high on the list of buyers from a Somo purged of Saddam's cronies.

In the end, the list includes Repsol and Cepsa, the Spanish companies, and ENI, the Italian oil major. Each is believed to have been awarded one million barrels of oil. Tupras, the Turkish oil company may have taken as much as three million of the Kirkuk barrels, which are already in storage at the Turkish port of Ceyhan.

Total has been awarded two million barrels of Kirkuk crude, a decision that will reassure the French company that it is not being shunned in a post-Saddam Iraq.

ChevronTexaco is to take the entire stock of Basra Light.

The absence of British companies and weak US presence is a pointer to the oil market that Somo is not taking instructions from its American advisers but is instead taking a pragmatic approach to business.

The tender was initially in confusion as oil traders struggled to contact Somo, which had no working phones or computer links. One said that logistics might have been the key -those companies able to supply tankers at short notice may have been preferred.

The second block of oil sales included such eager hawks as the Swiss and the Dutch. From the July 9 edition of International Oil Daily (no link):

European supermajors BP and Royal Dutch/Shell on Wednesday were confirmed as buyers of postwar Iraqi oil when Iraq's State Oil Marketing Organization announced the official results of its latest tender to sell 8 million barrels of Basrah Light crude.

Shell and BP were awarded 2 million barrels each of Jul. 15-31 loading Basrah Light, while US major ChevronTexaco and Swiss-based trader Taurus were awarded the other two cargoes.

It should be added, however, that the majority of the second block of sales will be refined in the U.S.:

Initial indications that Petrobras won one of the cargoes proved to be incorrect. Industry sources said traders at the Brazilian state concern had believed that the company, a regular buyer of Iraqi oil before the war, was successful with what it considered a "very aggressive bid" (IOD Jul.9,p1). BP is scheduled to load on Jul.13-15. It is expected to take its cargo to the US West Coast, though some traders speculated that the company would be willing to sell the cargo on the US Gulf Coast if the price was right. ChevronTexaco, which is to load its cargo between Jul. 20 and Jul. 23, will refine its barrels on the US West Coast, a company source said.

Taurus, the first non-refiner to buy postwar Iraqi oil, plans to flog its lot on the US Gulf market, while Shell is keeping its options open, industry sources said. The Anglo-Dutch giant has yet to fix a ship for its Jul. 26-28 loading dates and may even opt to switch destinations from Europe to the US Gulf provided Somo approves.

But it this appears to be a decision being made in large part on price. I don't see how a Swiss company's decision to have oil refined in the United States would represent the illegitimate spoils of an invasion. Now, if this war is all about oil refining...




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