The citizens and authorities in what is potentially Iraq’s wealthiest oil boom town are upset. They say oil companies are causing environmental problems and Baghdad is getting rich while they’re missing out.
The southern Iraqi region of Basra is estimated to hold about two thirds of all of the country\'s oil reserves. It is also home to the giant oil fields of Rumaila, Zubair and West Qurna which also produce a significant amount of natural gas.
And late last year the central government in Baghdad signed new contracts for further exploitation of these resources with multi-national energy companies, Shell and Mitsubishi. Around 12 international oil companies are currently working in Basra province, including Russia\'s Lukoil, Italy\'s Eni and China’s National Petroleum Corporation.
Yet the people of Basra feel they have seen barely any benefit from the natural resources in their home region. Despite the oil and gas in the area and the region’s potential to be Iraq’s wealthiest, “citizens’ living standards are still dire, unemployment is widespread, infrastructure is missing and reconstruction is not going anywhere,” local tribal leader, Falah al-Asdi, said.
Additionally, al-Asdi said the companies involved in Basra were not addressing any of these problems. For example, Basra was beginning to experience a housing shortage because land was being reserved for oil and gas exploration and extraction.
“These companies were supposed to take the initiative and implement both construction and service projects. But up until now all we have seen them do is pay lip service to these ideas,” al-Asdi complained.
The work that oil companies were doing was also proving detrimental to other economic activities in the region. Many farmers north and west of Basra had seen their vegetable fields damaged by seismic exploration of oil in these areas. Even if financial compensation was paid, one farmer said, it wouldn’t make up for the deterioration in conditions for agriculture or for the rise in unemployment.
This discontent is also being expressed by the regional authorities in Basra; they have gone so far as to file a lawsuit against the central government alleging that they have been left out of negotiations around lucrative oil and gas contracts.
The local authorities in Basra believe that because they contribute so much to Iraq’s national coffers, that they should be receiving more than they are at the moment. Like many other regions, Basra believes the central government in Baghdad is keeping Iraq’s wealth for itself; this is just part of the reason for the various calls for more autonomy from Baghdad.
The new contracts, signed late last year, “marginalize our role in strategic decision making,” Sabah al-Bazouni, head of the Basra’s provincial government, said. Additionally al-Bazouni felt that the international companies involved should be compensating locals for the damage they were doing, as well as the pollution they were causing.
“Basra should get some kind of compensation from these companies,” he said. “Such as the provision of health services or social development projects for citizens.”
The Basra authorities have also demanded that the payment plan by which the region gets its share of oil money be changed. Rather than being allocated one dollar per barrel of oil produced, they say they want 3 percent of the total oil revenues produced by the state. Only this would be enough to cover the costs of developing suitable infrastructure and compensating locals for the environmental and other costs of oil production.
“Three percent would be a fair rate to the citizens of the city, in order to provide what they need in terms of state services and construction projects as well as to generally help Basra,” explained Ali Hussein, a member of Basra’s provincial government.
In the longer term, some observers fear the result of ill will between the Basra region, the central government and the oil companies could result in insecurity and conflict in the area. Naysayers believe that the densely populated, geographical bottle-neck offers plenty of opportunities to extort funds by blowing up pipelines.
Some have already drawn parallels with Nigeria\'s violence-torn Niger Delta where local communities have suffered from frequent attacks on pipelines as well as environmental damage. And those tensions only seem set to rise further as Iraq continues to try and boost its oil production levels.
However others are more optimistic. A professor of economics at the University of Basra, Nabil Jaffar, thought the area was well positioned to benefit from its natural resources in the coming years.
"The city of Basra is living by a lake of oil, with oil infrastructure of great quality and a network of export pipelines for crude oil and natural gas,” Jaffar said. Basra could become “the most important oil city in all fields [of the oil industry].”