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12 Million Barrels of Oil Promise to Solve Unemployment Problem

Mayada Daood
“Six years from now, production ceiling will reach 12 million barrels,” said Iraq’s Oil Minister, Hussein al-Shahristani. “Iraq will turn into a giant workshop once the international oil companies start the two…
12.02.2010  |  Baghdad

Two rounds of meetings between June and December 2009 ended in the conclusion of 11 oil contracts with international oil companies. Iraq will raise production from its current 2.5 million barrels to 12 million barrels.

In June, three oilfields were assigned to different consortiums for development and in the second round of licensing contracts, a further six oilfields were earmarked for development.

“New pipelines extending East of the Tigris will be built, necessary for exporting oil via the Mediterranean,” said al-Shahristani, describing the projects. He added that large storage tanks would also be needed and that the huge operations would be carried out by the ministry and with outside contractors.

According to the licensing tender’s details, the companies winning the oil fields development contracts will get a fixed percentage on each barrel, rather than a percentage of accumulated profits. The Iraqi government will pay these expenses immediately after agreeing on the anticipated production level.

The Ministry of Labor & Social Affairs believes the number of jobs the new contracts will create to be 1.3 million. Oil Minister, Mr. Al-Shahirstani smilingly commented on this saying, “The day will come when we put the blame on the Iraqis for not applying to vacancies generated by the oil industry over the next two years, instead of the present criticism that we don’t provide job opportunities”.

The Minister said the concluded contracts provided that the volume of jobs specifically for Iraqis must not be less than 85%. This is vital in improving local skills which lost ground against foreign competitors because of many years of economic sanctions.

“The priority will be recruiting Iraqis,’ said the minister. “And if the sufficient technical expertise is unavailable, the companies concerned must provide the necessary training to the Iraqi employees, including setting up institutes and colleges for training staff.”

Munaf al-Sayegh, the economic expert at the Economic Reform Institute, does not agree with the Minister’s opinion and believes that anticipated recruitment of Iraqis during the two phases of oil licensing is ‘overestimated’, because the problem of unemployment in Iraq is too great to be resolved with these initiatives alone.

“Putting an end to unemployment in Iraq requires us to tackle the structural problems face by the Iraqi economy in terms of reliance on the oil sector as the only source for budget development,” He said. “Other sectors need to be included in a well-considered comprehensive plan focusing on the industrial and agricultural sectors, providing adequate support.”

Vice-chairman of Middle East Shell Company, Mr. Muneer Buaziz stated that the contract his company concluded for development of Majnoon oilfield may be described as the largest investment in the Middle East.

“The project will be huge. There will be considerable challenges, particularly in generating the appropriate environment for the success of the companies involved. We need visa facilitation, airports, ease of import of equipment and more.”

Mr. Buaziz believes the most vital element needed during the implementation stage of the concluded contracts will providing Iraqi employees with adequate experience and qualifications in the fields.

Job opportunities will not just be limited to the oilfields. Sub-contractors will also need people.

“There are plans to increase production level to 175,000 barrels per day during the next three years”, said Mr. Buaziz. “Production will reach up to 1.8 million barrels per day in eight years, which will require a huge labour force,” he added.

The manager of Italian Eni Oil Company, Paolo Scarloni, agrees with Buaziz's statement.

“The huge workload involved in raising production from 200,000 to 1.2 million barrels per day at Al-Zubair oilfield will demand considerable efforts,” he said. A unique contract has been written that is aimed at developing the Iraqi economy in the coming years.

“There will be very big job opportunities,” said Mr Scarloni. “To begin with, the Zubair oilfield alone will need about 10,000 workers, apart from other ancillary services that will be needed as well.”

Funding for the projects is entirely the companies’ responsibility, according to al-Shahristani.

“The companies will be fully responsible for providing these funds and other associated investments, including the Iraqi partner and other sub-contracts. All these funds will come from overseas and will not affect the Iraqi banks or demand any payments by them.”

The Minister continued: “Iraqi banks need to upgrade their performance to cope with banking transactions, like L/C opening, considering the anticipated large number of local contracts, during the execution of works in Iraq. The concluded contracts have stipulated that Iraqi companies must be given priority if found to be capable of carrying out any part of the projects, without the need to engage foreign companies to do the same jobs.”

Part of the Services Contract provides for extending necessary support to companies. The Oil Ministry, in return, will provide facilitations such as issuance of visas, approvals, preparation of oilfields for commencement of works and all other facilities required for carrying out their works.

Iraqis view the final conclusion of the oil contracts on January 31 this year with great optimism, hoping these steps will improve their living standards and contribute to building the other economic sectors, after decades of stagnation and poverty.