France's principal oil company said today that its long experience in Iraq would give it an edge over rivals seeking to develop two of the largest Iraqi oil fields should a pro-Western government come to power in Baghdad.
TotalFinaElf SA said its knowledge of the oil fields and its contacts with Iraqi officials would overcome any hostility it might face from a new regime in Baghdad because of the French government's resistance to a U.S.-led invasion.
TotalFinaElf, which has more than 75 years of experience in Iraq, has negotiated off and on for 10 years to develop and share production from the Majnoon and Bin Umar fields in southern Iraq. The company never signed binding contracts because of United Nations trade sanctions against Iraq.
"On the technical side, we have an advantage on two large fields," chief executive Thierry Desmarest said in an interview after presenting the company's 2002 financial results. While saying it was "far too early" to make specific predictions about Iraq's oil industry, he said it was likely that a new government would invite in foreign oil companies because of the need for investment and technical expertise to reconstruct the sector and to raise production after years of sanctions and, perhaps, devastation in a war.
Desmarest's comments reflected the political and corporate jockeying taking place as the oil industry debates which companies and countries might benefit if a war opened access to Iraqi oil.
Iraq's reserves are second only to Saudi Arabia's in the Persian Gulf.
Much of the focus has been on whether companies from the United States and Britain would have an advantage because they took the lead in pushing for military action against Iraq. Such success might come at the expense of TotalFinaElf and Russian companies.
"Put yourself in the position of someone in a leadership position of a democratic Iraq. Why would you want to have commercial relationships with countries that wouldn't help liberate Iraq to begin with?" said Barry K. Worthington, executive director of the U.S. Energy Association in Washington. "It's only human nature that you're going to do helpful things for people who helped you."
Worthington said he thought British and Italian companies might benefit as well as American ones. He also predicted a critical early U.N. role in managing the oil industry. The United Nations now oversees Iraqi oil revenue under the oil-for-food program.
A recent study by Valerie Marcel, a senior research fellow at Britain's Royal Institute of International Affairs, said oil companies that might invest in Iraq are divided between "incumbents who maintained links with the Iraqi regime over the past decade," and "incomers" from the United States and Britain "who would look to find at least equality of opportunity in the new Iraq."
The report noted that the two fields sought by TotalFinaElf and another large field sought by Russia's Lukoil "are the ones that would be of greatest interest to the American and British oil companies."
Many oil industry specialists believe that the United States and a new Iraqi government would have powerful political and economic reasons not to play favorites in distributing oil contracts. The United States would want to put control of the oil fields in Iraqi hands as soon as possible, if only to prove that Washington's intentions in waging the war were more noble than mercenary. Any new Iraqi government would try to attract a broad range of companies to maximize both investment and political goodwill.
In the event of war and a U.S.-led victory, the Americans "are going to want to get the management of the oil industry in the hands of a new Iraqi government as quickly as possible," said Daniel Yergin, chairman of Cambridge Energy Resources. In turn, he said, "a new government will likely be nationalistic. It will probably be pretty tough in the deals it makes, and be intent on bolstering its legitimacy and maximizing its revenues."
Yergin and other industry specialists hold up the experience in Kuwait as evidence that U.S. oil companies should not assume they'll get easy access to Iraqi oil resources. Despite the leading role played by the United States in liberating Kuwait in 1991, nationalistic opposition in parliament has blocked U.S. and other Western oil companies from getting new contracts to exploit Kuwaiti oil.
Issam Chalabi, a former Iraqi oil minister who has lived in Jordan since 1991, emphasized in a Feb. 10 speech in Houston that "there should be a level playing field for the international oil companies to participate in the oil industry." The speech was reprinted in the Middle East Economic Survey.
Noting a "widely held concern that this is a war about oil," Chalabi said: "It is imperative to dispel this notion."
Desmarest defended the stand taken by France and Germany, which emphasizes diplomatic efforts to avoid war.
"For me personally, the approach of the French and German governments to try to achieve disarmament peacefully is a reasonable one," Desmarest said at a news conference. He expressed special concern that a war would disrupt other countries in the region, especially Iran, where TotalFinaElf is the largest foreign oil company.
Asked about U.S. anger over the French and German position, Desmarest said, "Even if it is a bit emotional, we must not forget the target is the same: reintroducing Iraq in the international community."