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San Francisco Chronicle:  Foreign oil firms step up to train workers in Iraq: There's no immediate payoff, but they're thinking long term: "We are interested in building long-term relationships with Iraqis and establishing a material and enduring presence in Iraq," Shell spokesman Simon Buerk said. ( 7 Nov 04


Sunday, November 7, 2004


Washington -- International oil companies have begun voluntary efforts to train Iraq's oil workers and provide technical assistance, hoping to generate goodwill and eventually get access to the country's huge oil reserves.


Companies from the United States, Britain and Russia -- including San Ramon's ChevronTexaco Corp., BP, Royal Dutch/Shell Group and Lukoil -- are paying to send Iraqi oil workers overseas to teach them the latest techniques in developing and managing oil fields.


Natural gas also in play


In addition, Shell agreed to look into the most effective use of the country's natural gas reserves. Chevron is advising Iraqis on two of the country's biggest oil fields now in production, Kirkuk in the north and Rumaila in the south.


"The industry is about relationships -- face-to-face relationships count for something," said Lawrence Goldstein, president of the Pira Energy Group in New York, an international consulting firm.


"If you're the company and individuals involved in the face-to-face training, it's clearly beneficial. ... It's offensive, it's defensive, it's altruistic in many ways, and it's self-serving."


The companies said they are responding to a need for assistance and are not jockeying to grab the country's oil. They said that they have offered similar voluntary assistance in other oil-rich countries with limited resources.


"We are interested in building long-term relationships with Iraqis and establishing a material and enduring presence in Iraq," Shell spokesman Simon Buerk said.


A spokesman for Iraq's oil ministry said he was not authorized to comment about oil companies' activities and could not immediately arrange an interview with an official who could.


International oil companies are eager to gain a foothold in Iraq because the country is believed to have the world's second-largest conventional oil reserve, although some analysts said the statistics are questionable.


Iraq nationalized its oil fields in the 1970s, and no foreign companies have been allowed to own fields in the country since. Under Saddam Hussein, some concessions were granted, but they were later canceled or never came to pass because of United Nations sanctions.


Iraq is attractive because its oil is considered high quality and relatively cheap to produce, analysts said. Daily oil production in the country has been hampered in recent months because of insurgents' attacks on pipelines. Analysts said Iraq's oil industry is in need of modernization and investment after years of neglect.


The Iraqi government has not established provisions to allow foreign investment in the oil industry, and companies are hoping such measures will eventually be enacted.


Oil companies said they expect such decisions will be made after an elected government takes office. Elections are scheduled for January.


Iraq this summer solicited bids on a comprehensive evaluation of the Rumaila and Kirkuk fields, and companies from around the world are awaiting its response to the proposals. The analysis would help determine how much oil is in the ground and how to best pump it, and is key to maximizing production, analysts said.


Chevron initiative


In one goodwill project is training Iraqi oil company employees as part of a broader "technical service agreement" with the country's oil ministry, said Andrew Norman, a company spokesman.


"The overall aim of the program is to really bring the Iraqis up to date with their petroleum engineering techniques, modern-day operating standards," Norman said. "It was conceived jointly by the ministry and by us. We made it very clear that it was a goodwill gesture on our part. They made it very clear that there will be no payment in kind. There is no quid pro quo."


But he added: "You might reasonably say, 'What's in it for us?' To be honest, this is part of a broader relationship-building effort we have under way. It's important to build relationships with those folks. At the same time, we understand the interim government doesn't have the mandate to award any oil contracts."


He said the company's work with the oil fields could be described as reservoir studies. At the Kirkuk field, for instance, he said the company is helping with seismic information, which is used to determine sites to drill.


Master plan


Royal Dutch/Shell, based in the Hague and London, was asked by the Iraqi oil ministry to help create a master plan for natural gas, which would help develop its fields, Buerk said. Shell is also offering scholarships for Iraqi oil workers to study abroad.


In an internal newsletter circulated earlier this year, Wolfgang Strobl, the company's projects director for exploration and production activities relating to Iraq, said Shell wanted to develop untapped Iraqi oil and natural gas reserves and work with the government to redevelop existing fields. Strobl was not available for comment.


Through an affiliate, ExxonMobil Corp., based in Irving, Texas, has signed an agreement with Iraq's oil ministry to "broadly define the conditions for potential cooperation ... in the areas of technical assistance, joint studies and human resource development," company spokeswoman Susan Reeves said.


"If the Iraqi people decide they want the help of international oil companies to develop their resources, ExxonMobil would have an interest in participating," Reeves said.


Special correspondent Omar Fekeiki in Baghdad contributed to this report.

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