- Title: IRAQ: Despite oil wealth Basra still lacks basic services
- Date: 3rd November 2009
- Summary: CHILDREN OUTSIDE HOUSE
- Embargoed: 18th November 2009 12:00
- Keywords:
- Location: Iraq
- Country: Iraq
- Topics: Domestic Politics,Social Services / Welfare
- Reuters ID: LVACE48GGWTF16EXVI8TOHDA8RSS
- Story Text: Though it has enormous strategic importance as the hub for the country's vital oil exports, the southern Iraqi city of Basra is home to abject poverty. It lacks basic services, with raw sewage seeping into the ditches and rubbish piling up on unpaved streets.
Once known as the prosperous "bride of the Gulf", Iraq's only port city is recovering from years in the grip of Shi'ite militias.
Sewage courses into Basra's historic canals, power flickers on and off, and there are few economic alternatives to oil.
In Rumaila, north of the city, Kefaya Kareem and her husband live in a squalid clay home and struggle to feed their children. But beneath this land sits one of the world's largest oilfields. Flames shoot out of the desert floor as oil is drawn from Rumaila, the super giant field that China's CNPC are taking on in a multibillion-dollar deal.
"We have not benefited from anything, neither from the (oil) company nor from the oil. We have not benefited from anything," said Kareem holding onto her youngest son.
It is into this environment of contrasts and opportunity that the world's leading energy companies will enter as they sign up to develop Iraq's tantalising oil and gas wealth.
They will face not only violence, dilapidated facilities and an opaque bureaucracy, but local opposition and demands for jobs and for steps to reverse decades of environmental damage.
One resident said that although the security situation in Basra had improved, he did not feel as though he were living in an oil-rich country:
"Is this Iraq? Is this an oil-rich (country)?" he said, pointing to a large pool of sewage water in the street.
"It is true that there is security and that you can go anywhere you like and when you like. Security is there, but what is the use of that? (Reporter asks question) It is true that it is an oil country, but as you can see, can anyone sleep here in the middle of sewage water? Can anyone sleep in sewage water? Is this an oil-rich country?" said the resident of Basra's Hay al-Hussein neighbourhood.
Iraq, which has the world's third largest oil reserves, is due in December to host major companies like Exxon Mobile in its second energy auction this year, a central plank of the Oil Ministry's strategy to open up fields to foreign firms for the first time since the industry was nationalised decades ago.
Officials in Basra, the southern oil hub controlled by Prime Minister Nuri al-Maliki's Dawa Party, support such deals as they scramble for investment needed to overhaul a city in shambles.
"We support foreign companies working in Iraq, especially those which invest in oil and especially those who work to increase oil production in Iraq.
We need huge amounts of money to build Iraq," said Jabaar Amin, head of Basra's provincial council.
But little foreign money has appeared in Basra yet, and oil projects have to appear attractive to politicians, under pressure from Maliki to improve services and ensure him a strong showing in January's parliamentary polls.
"If the contracts are beneficial to Iraq, we welcome them. If they subjugate us and take Iraq's oil wealth, we do not," Amin added.
For oil firms, opposition from local stakeholders is a major part of the risk they see in Iraq, and some fear that their profits, which they already consider to be small, will be further eroded by local taxes. They will seek to defray the security risks by creating at least some local jobs.
Yet some in Basra, including employees of the state South Oil Company (SOC), have come out against deals proposed in an initial bidding round, arguing that handing over to foreign firms oil fields that are already in production would squander Iraqi money and effort.
The only deal produced in the first auction in June was the Rumaila contract, in which BP and CNPC took a major cut in their proposed fee to two USD a barrel, to clinch the deal.
Iraqi oil unions, trying to regain influence after being outlawed by late Iraqi leader Saddam Hussein, have called the Rumaila deal illegal and hold out the possibility of strikes if they don't get guarantees that there will be no SOC job cuts.
To win over local powerbrokers, Iraq's cabinet has approved a proposal that would give Basra's provincial government $0.50 for each barrel of oil from the province, the exit point for the bulk of Iraq's oil exports.
"Basra is a big city and an important and strategic city, which has been greatly damaged by war, three wars which have taken place here," said Basra governor Shiltag Aboud.
"Other provinces have not suffered the way it has. The city needs huge financial allocations and thankfully, his excellency the prime minister and our federal government have paid attention to this and want to allocate funds especially for Basra, different to the other provinces, because they have not had wars and disasters and their populations and size are smaller. Basra has a larger population, its area is larger, it has a special economic status as this is where the oil companies are. So they (the government) will give Basra half a (U.S.) dollar for each barrel. The sum is very small, but we, the people of Basra, are satisfied," Aboud said.
The proposal, which must be approved by parliament, mirrors a similar demand from Wasit province where China's CNPC earlier this year inaugurated work at the Ahdab oilfields.
Aboud said he hoped such deals would bring modern technology and more efficient practices to an industry starved by global sanctions and Saddam's travel restrictions which prevented local experts from updating their skills abroad.
He said foreign companies working in the area would give a boost to the wider local economy.
"This company (BP and CNPC) will not only be contributing to the oil sector but will contribute to the economic, cultural and environmental situation in Basra too. They will cooperate with us and contribute towards opening up a cultural centre here or paving a road there. They (the firms) are not going to just be in Rumaila or in places far from everyday life. Their impact on the city will be felt," he said.
Foreign firms and subcontractors must employ Iraqis "to the maximum extent possible" given safety and cost constraints, a model contract from the first round of bidding states. But critics deem such a clause as far too weak.
Senior oil executives say they are concerned about getting stuck with liability for cleaning up facilities that have been damaged by war and neglected for decades. According to the first round contracts, foreign firms will expected to clean up pre-existing environmental problems but they will be reimbursed for this. - Copyright Holder: REUTERS
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