Iraqi Oil Minister Talks to German Daily About “Oil Police”, Oil Law, Oilfields

Text of report by right-of-centre daily German newspaper Die Welt on 1 July

[Report on interview with Iraqi Oil Minister Husayn al- Shahristani by Birgit Svensson; in Baghdad, date not given: "Awakening in Iraq"]

Baghdad – The most powerful man in Prime Minister Nuri al- Maliki’s cabinet is only 1.58 metres tall. He seems inconspicuous among his gigantic bodyguards. You have to look closely to see the Iraqi oil minister in a gray suit, gray little goatee and equally gray hair. But the big signet ring with the turquoise-coloured stone on his right pinkie reveals that the wearer is a high-ranking personality. “Only Shi’i dignitaries or Sunni shaykhs wear such a ring,” whispers his assistant. Here in the function room at a Baghdad hotel everyone knows that this little man will to a large extent help decide the future of Iraq.

Husayn al-Shahristani currently carries the hopes of many. The hopes of the Iraqis that finally enough oil will flow to supply them with work and money. The hopes of the Americans that the oil law, pending for two years, will finally be passed, take effect and above all offer US companies the chance to invest. And not lastly the hopes of the global community that Iraq, a member of the Organization of Petroleum-Exporting Countries (OPEC) will sharply increase its production quantities so that the price of oil will finally stop rising incessantly.

“We are trying to produce about 3 million barrels of oil daily by next year,” says the minister in conversation with Die Welt. In some Western media there has already been talk about 4 million barrels (159 litres each) of daily production. “That is exaggerated, we can’t manage that,” replies Shahristani clearly and distinctly. Currently, there are only two regions in which there is production: Basra in the south and Kirkuk in the north. Together about 2.5 million barrels a day would be pumped, 2 million of them exported.

“This is the largest production quantity since the overthrow of the previous regime.” Everything is then supposed to get better in 2013. The minister expects a production of 4.5 million barrels – with the help of international companies, which for the first time in 40 years are to produce in the country again.

Of the 2.5 million barrels the wells around Basra, the second largest city on the Persian Gulf, deliver 75 per cent. “Our largest fields are in the south, although the entire country almost swims on an oil bubble,” says Shahristani. The most recent studies have yielded that Iraq is the second richest oil nation in the world after Saudi Arabia. The black gold will last for close to 200 years here – depending on production quantities.

But the fields around Kirkuk in the north are old, and the yield is diminishing. Pumping has been under way in the north since 1927. In addition, since the invasion of the US and British troops there have been plenty of attacks on production facilities and pipelines there as well as many cases of sabotage, so that sometimes production has had to be completely shut down. “This has faced us with enormous difficulties,” the minister admits. Kirkuk produces only 600,000 barrels a day. However, its capacity would still be 1 million. Security has improved since January, and now it is hoped that these possibilities can soon be fully utilized.

The first barrel of oil was pumped at Basra 60 years ago. “Throughout all the years we did not pump close to as much in the south as right now.” But here, too, there are difficulties. While in the north attacks and sabotage halt production, in the south it is corruption and smuggling. Shahristani purposefully suppresses that rumours of bribes circulate about his ministry as well.

Instead, the oil minister speaks about rival Shi’i militias which finance themselves with “stolen” oil. Above all crude oil, which is pumped in the fields and from there goes to the port of Basra in order to be offered to the traders. On the way there the pipelines are tapped, says Shahristani. “This way we lost a great deal of oil during last year.”

That could change. Because the military operation against “the criminals” which the government in Baghdad started at the end of March in Basra, and which initially also looked like a setback for Prime Minister Maliki and his cabinet, now seems to be working after all with the help of US and British troops. Although individual cities in the south are still firmly under the control of Muqtada al- Sadr and the groups affiliated with him, the government has the upper hand in Basra. This makes the oil minister confident that the oil smuggling will be stopped in the foreseeable future.

For this purpose Shahristani is relying fully on the oil police, who are a major expense for the government; 30,000 men are employed to protect the oilfields, production facilities, workers, refineries, and pipelines. To begin with, a department of the Oil Ministry put together protective troops for the facilities. Different firms and organizations were engaged for different projects.

While talking Shahristani fails to mention that this handling made the disaster even greater and opened the door to corruption, nepotism, and infiltration. Often the crucial tips for bombings and attacks came from the ranks of the members of the protective troops. Since January these forces now no longer rank under the Oil Ministry but the Interior Ministry.

The oil minister does not seem unhappy about it and praises the improved work of the oil police. “There were dismissals and new recruits. Since the Sunni shaykhs have been cooperating with us in the antiterrorism struggle, even former players in the insurgency have become oil police,” says Shahristani. While an average of one attack a day on the oil production was recorded in 2006 and 2007, last May it was only four.

Shahristani is therefore able to build on an estimated additional revenue of up to $15 billion for this year, which must also be ascribed to the continuously rising price of oil, however. Thus, his ministry is responsible for about 90 per cent of the country’s income. The rest of the economy is almost nonexistent. Except for oil, hardly anything is produced in Iraq at this time.

In order to be able to increase the oil production sharply Shahristani must open up new wells, however. But that is precisely where the problem lies. Iraq still has not passed a binding oil law, which regulates distribution and exploration, although ministers and the US Government have been urging it for almost two years and the new constitution which took effect in January 2006 stipulates it.

Shahristani explains it this way: “The government approved the draft law in September 2006 and sent it to the parliament for a vote. All regions are to profit equally from it. The key to the distribution is to be the population share.” The minister refers to the constitution, which designates oil and gas as national property, which belongs to all Iraqis. Meanwhile, however, the Kurdish regional government has all by itself signed oil contracts with foreign companies, without informing the others. This led to the attitude among many parliamentarians that if it is not respected in the Kurdish areas, it makes no sense to pass the law.

Shahristani himself also seems to see it that way. “Every oil contract must be confirmed by the national oil and gas committee, which is chaired by the prime minister.” The struggle between the Kurdish national government in the north and the central government in Baghdad is therefore not over.

To make up for it he has another success to show. After 40 years of national administration the country is once again allowing foreign oil companies into the country. The Rumaila, Kirkuk, Zubair, West Kurna, Bai Hassan, and Maysan fields are available to foreign companies for long-term contracts, Shahristani announced.

In a pre-selection the government has picked out 41 companies that can apply. Last week the ministry already negotiated six short- term contracts worth $500 million each. The partners are Royal Dutch Shell, Shell with BHP Billiton, BP, Exxon Mobil and Chevron with Total.

“We urgently need foreign investments,” says the minister. He says he is confident: “The companies that invest in this sector will naturally be rewarded and compensated for it, but receive no shares in the Iraqi property. The amount of the compensation will be determined by us alone!”

Originally published by Die Welt, Berlin, in German 1 Jul 08.

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