Accessibility links

Breaking News

BACKGROUND REPORT – April 11, 2003: Iraqi Oil - 2003-04-10

This is a VOA Special English Background Report.

Most of the money needed to rebuild Iraq after the war will likely come from its major export -- oil. American Vice President Dick Cheney says Iraq could produce up to three-and-a-half million barrels of oil a day by the end of this year. This would be a fifty percent increase from last year. First, though, Mister Cheney said Iraq needs international help to get its fields to pump oil again.

Already, the American company Kellogg Brown and Root has gone into southern Iraq to shut down burning wells in the Rumaila field.

Traditionally, Iraq has kept its oil industry under national control. International oil companies are not sure if they will be welcomed in the future. There is also a question whether agreements that were signed by the government of Saddam Hussein will still be honored.

Several years ago, the Irish company Petrel Resources negotiated a plan to explore parts of Iraq’s western desert. But United Nations restrictions against Iraq have prevented the company from drilling. Also, Russia's biggest oil company, Lukoil, says it has an agreement to explore Iraq’s West Qurna field.

In any case, an increase in Iraqi oil production would affect the Organization of Petroleum Exporting Countries. Currently, Saudi Arabia leads the eleven-member group in exports. The Saudis produce about seven-and-a-half million barrels a day. Iraq, however, has the ability to pump an estimated eight-million barrels a day. This makes Iraq the only possible competitor to Saudi Arabia.

OPEC supplies about forty percent of the world's oil. Experts believe OPEC would fall apart if production by Iraq reached the levels of Saudi Arabia. Such an increase in supply would cause world oil prices to drop. And that, the experts say, would cause financial, economic and social problems among OPEC members.

Another question is, who has the right to sell Iraq's oil? At the moment, the United Nations is in control. But the current period of the U-N oil-for food program ends in June. The Security Council must either suspend the program or extend it again.

The United States says it went to war to disarm Iraq and free its people. Many opponents of the war, however, do not believe those were the only reasons. They argue that since America is the world's biggest user of oil, that is what this war is really about.

The United States has proposed to set up a group mostly of Iraqis to supervise Iraq's oil ministry. American officials say international experts could give advice. But they say all of Iraq's natural resources should be used to help its people.