BP Entry contract for Rumaila field

Fourth release, 31 July 2011

During the second half of 2009, Iraq held two auctions of its largest oilfields, awarding them to multinational companies such as BP, Shell and ExxonMobil to operate under 20-year contracts. Between them the oilfields account for over 60% of Iraq’s reserves. The contracts were service contracts rather than the companies’ preferred production sharing agreements, which had been proposed for Iraq but rejected as giving too much away.

Media reports of the auction focused on the headline remuneration fees. These sounded so low – between $1.15 and $5.50 per barrel – that many commentators questioned the profitability of the deals. But as always in oil contracts, the devil is in the detail. And whereas the auctions were billed by the Iraqi government as among the world’s most transparent contracting processes, the first contract, for the super-giant Rumaila field near Basra, was privately renegotiated between the Iraqi government and the winning BP/CNPC consortium for more than three months after the auction.The result was that the terms changed significantly from the published model contract on which the auction was based, to  make it much more attractive to BP and CNPC, at the expense of the Iraqi people.

  • We have obtained the renegotiated Rumaila contract, and can reveal its contents for the first time. The major changes are explained in the report “From Glass Box to Smoke Filled Room – How BP secretly renegotiated its Iraqi oil contract, and how Iraqis will pay the price”, written by Fuel on the Fire author Greg Muttitt and published by PLATFORM.

NEW REPORT: From Glass Box to Smoke Filled Room.

DOCUMENT 12: the original model contract, on which the auction was based.
DOCUMENT 13: the leaked, renegotiated contract, which was actually signed.

Also in today’s release:

  • Another document released today reveals the possible reason BP was so successful in changing the terms in its favour, by focusing on the detailed terms of the contract. In April 2009, Ministry of Oil officials travelled to the UK to explore how to meet their training needs. Just two months before the auction, foremost among the areas where they sought training were commercial and negotiating skills. And the training provider they went to? BP!

DOCUMENT 14: Letter from BP to Iraq Ministry of Oil, 28 April 2009.

  • The contracts were opposed by many in Iraq, including oil experts, the management of the South Oil Company (which would have to work with BP on the Rumaila field), the oil trade union and the parliamentary oil and gas committee. When parliamentarians called in the Iraqi Oil Minister for questioning about the contract, Prime Minister Nouri al-Maliki wrote to the speaker of parliament to warn against the move. In the private and confidential letter, released today, he told the speaker that he would consider such questioning to be “in harmony” with recent major terrorist bombings in Baghdad.

DOCUMENT 15: Letter from Nouri al-Maliki to parliament, October 2009 (Arabic original)

DOCUMENT 16: Letter from Nouri al-Maliki to parliament, October 2009 (English translation)

Fifth release, July 17, 2012

(See also today’s press release)

Two documents are published today, revealing for the first time the role of the Energy Infrastructure Planning Group, whose purpose was to plan for the running of Iraq’s oil industry during the period of direct U.S. occupation and administration of Iraq (under the CPA of Paul Bremer, as it became).

EIPG was established in summer 2002 by Undersecretary of Defense for Policy Douglas Feith. It was led by Michael Mobbs, a political appointee in the Department of Defense. The other members were Michael Makovsy of the Department of Defense, Seneca Johnson of the Department of State, Clark Turner of the Department of Energy (Strategic Petroleum Reserve) and a CIA analyst.

The EIPG did the thinking behind the subject, and made recommendations to the Deputies and Principals Committees of the National Security Council (comprising the heads and second-in-commands of the government agencies relevant to national security).

They were obtained from the Department of Defense under the Freedom of Information Act. This is the first clear evidence, more than nine years on, that Bush administration officials were planning before the war to open the way to multinational oil companies, an assertion consistently denied by the government.

DOCUMENT 17: a briefing to the Deputies Committee on November 6, 2002.  The main topic of the meeting is how to spend the proceeds from Iraqi oil.

See especially page 10, where weighing up whether to repair war-damaged Iraqi oil infrastructure, one of the cons is that it “could deter private sector involvement”. Although this route was rejected (see DOCUMENT 18), it could later be seen in the U.S. forces’ failure to stop looting of the infrastructure in April 2003 (they only protected the Oil Ministry building, which held the irreplaceable geological data – they did nothing to protect drill rigs, pump stations etc). The attitude was seen again when the Oil Ministry’s considerable human resources were cleared out in fall 2003, in favor of friends and family of the new oil minister.

Note also on the contents page (2) the EIPG planned to consider later that month “whether to use control of Iraqi oil to advance important U.S. foreign policy objectives”. DOD reports that it holds no record of such discussions. They are likely to involve not direct U.S. energy interests, but whether to tear up eg Russian and Chinese contracts in order to harm those countries.

(The briefing was stored by the DOD as landscape printed on portrait paper – hence the edges are cut off in the official archive too!).
DOCUMENT 18: a briefing to the Secretary of Defense Donald Rumsfeld on January 11, 2003, incorporating comments and decisions from earlier Deputies meetings.

Here the option of leaving war damage unrepaired so as to make room for Big Oil has been rejected, in favor of appointing Halliburton subsidiary KBR to carry out repairs (page 5).

Priorities are set of restoring crude oil production (which the USA needed) over electricity and fuel (which Iraqis needed – page 6).

Increasing Iraqi production to 5 million barrels per day (from 2.5m bpd)  is favored as it “helps consumers” and “puts long-term downward pressure on the oil price”

Strikingly, “pubic diplomacy” (page 4) means the message that would be given to the public, including saying that “we will act… so as not to prejudice Iraq’s future decisions” – even though the opposite is proposed as substantive policy. In other words, the briefing recommends that the Bush administration mislead the public on how it would approach Iraqi oil.

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