Bush's Petro-Cartel Almost Has Iraq's Oil

Editor's note: This is the first of a two-part series. Go here to read the second installment.

Iraq is sitting on a mother lode of some of the lightest, sweetest, most profitable crude oil on earth, and the rules that will determine who will control it and on what terms are about to be set.

The Iraqi government faces a December deadline, imposed by the world's wealthiest countries, to complete its final oil law. Industry analysts expect that the result will be a radical departure from the laws governing the country's oil-rich neighbors, giving foreign multinationals a much higher rate of return than with other major oil producers and locking in their control over what George Bush called Iraq's "patrimony" for decades, regardless of what kind of policies future elected governments might want to pursue.

Iraq's energy reserves are an incredibly rich prize. According to the U.S. Department of Energy, "Iraq contains 112 billion barrels of proven oil reserves, the second largest in the world (behind Saudi Arabia), along with roughly 220 billion barrels of probable and possible resources. Iraq's true potential may be far greater than this, however, as the country is relatively unexplored due to years of war and sanctions." For perspective, the Saudis have 260 billion barrels of proven reserves.

Iraqi oil is close to the surface and easy to extract, making it all the more profitable. James Paul, executive director of the Global Policy Forum, points out that oil companies "can produce a barrel of Iraqi oil for less than $1.50 and possibly as little as $1, including all exploration, oil field development and production costs." Contrast that with other areas where oil is considered cheap to produce at $5 per barrel or the North Sea, where production costs are $12 to $16 per barrel.

And Iraq's oil sector is largely undeveloped. Former Iraqi Oil Minister Issam Chalabi (no relation to the neocons' favorite exile, Ahmed Chalabi) told the Associated Press that "Iraq has more oil fields that have been discovered, but not developed, than any other country in the world." British-based analyst Mohammad Al-Gallani told the Canadian Press that of 526 prospective drilling sites, just 125 have been opened.

But the real gem -- what one oil consultant called the "Holy Grail" of the industry -- lies in Iraq's vast western desert. It's one of the last "virgin" fields on the planet, and it has the potential to catapult Iraq to No. 1 in the world in oil reserves. Sparsely populated, the western fields are less prone to sabotage than the country's current centers of production in the north, near Kirkuk, and in the south near Basra. The Nation's Aram Roston predicts Iraq's western desert will yield "untold riches."

Iraq also may have large natural gas deposits that so far remain virtually unexplored.

But even "untold riches" don't tell the whole story. Depending on how Iraq's petroleum law shakes out, the country's enormous reserves could break the back of OPEC, a wet dream in Western capitals for three decades. James Paul predicted that "even before Iraq had reached its full production potential of 8 million barrels or more per day, the companies would gain huge leverage over the international oil system. OPEC would be weakened by the withdrawal of one of its key producers from the OPEC quota system." Depending on how things shape up in the next few months, Western oil companies could end up controlling the country's output levels, or the government, heavily influenced by the United States, could even pull out of the cartel entirely.

Both independent analysts and officials within Iraq's Oil Ministry anticipate that when all is said and done, the big winners in Iraq will be the Big Four -- the American firms Exxon Mobile and Chevron, the British BP Amoco and Royal Dutch Shell -- that dominate the world oil market. Ibrahim Mohammed, an industry consultant with close contacts in the Iraqi Oil Ministry, told the Associated Press that there's a universal belief among ministry staff that the major U.S. companies will win the lion's share of contracts. "The feeling is that the new government is going to be influenced by the United States," he said.