An April 15 article incorrectly said that work now being done by a Halliburton Co. subsidiary in Iraqi oil fields would be put out for competitive bidding. KBR, a division of Halliburton, is expected to complete the contract for the first phase of emergency work, now expected to cost roughly $600 million. Subsequent oil field repair work will be open to competitive bidding. (Published 4/16/03)
The Army Corps of Engineers will solicit competitive bids for a contract to handle emergency repairs to the oil fields in Iraq, now estimated to cost approximately $650 million.
Before the war began, the Corps of Engineers had signed what it calls "a bridge contract" with Halliburton Co., the second-largest provider of oil-field services, which was at one time run by Vice President Cheney, to handle firefighting and emergency repairs.
But damage to the oil fields was less severe than expected, and, with more time now, the Corps of Engineers plans to solicit competitive bids, spokesman Scott Saunders said yesterday. According to Bloomberg News, KBR, which won its contract before the war began, already has done about $50 million of repairs, so the balance of the work to be bid would be $600 million.
Originally, U.S. officials had feared that there would be widespread destruction of oil wells in the war. Instead, the damage was limited, with only nine wells in the southern part of the country set on fire. The last fire was extinguished this weekend. Another well in the northern part of the country was also damaged, although it may have been the result of an industrial accident, Saunders said.
Putting the contract out for competitive bids would rid the Corps of Engineers of a political liability -- questions about the original contract, which was let on a sole-source basis. The award of the contract to Halliburton was criticized by Democratic members of Congress.
Halliburton's KBR unit, which would have carried out the work, was already under contract to help plan how to deal with war damages to oil fields. Because competitive bidding would have taken 45 days, the Halliburton unit was put under contract in the interim, Saunders said.
Fadel Gheit, an oil industry analyst with Fahnestock & Co., said large oil-field service companies such as Schlumberger Ltd., Halliburton and Baker Hughes Inc. are likely to be joined by smaller, more specialized firms in bidding for work during the early phase of repair. "It will be everybody and his brother. There could be 20 to 30 companies," he said.
Gheit said the early phase "is just going to put on the Band-Aid." The more lucrative phase will come later, undoing the damage done in 20 years when there was barely any maintenance. During that period, oil-field equipment has been "rusted, corroded, outdated, cannibalized and improvised," he said.
That phase will probably be worth billions of dollars, he said. "Longer term it's going to be an ongoing process that will probably peak in about two years" and will include major upgrades and reconstruction, said Gheit.
The price of crude oil rose yesterday on speculation that the Organization of Petroleum Exporting Countries may reduce production to offset a return of Iraqi oil to world markets. OPEC is expected to meet in coming weeks to discuss possible ways to curb output and boost prices. Crude oil for May delivery rose 49 cents, or 1.7 percent, to $28.63 a barrel on the New York Mercantile Exchange.