Leaked contract reveals BP’s control of Iraqi oil

By Ed
New Left Project
31 July 2011

A report published today uses leaked documents to shows how BP secretly renegotiated it’s Iraqi oil contract, and how Iraqis will pay the price. Here is the press release for the report, published by PLATFORM.

A leaked contract between BP and the Iraqi government has revealed the extent to which the company has gained control over Iraq’s oil. The 20-year contract for the Rumaila field near Basra published today by oil industry watchdog

PLATFORM, commits future Iraqi governments to paying BP whether or not it extracts oil, irrespective of OPEC quotas and of the state of Iraqi pipeline and export infrastructure.

BP was awarded the deal at an auction in June 2009, but suspicions were raised when the company did not sign the contract until four months later. The Iraqi government said nothing had changed in the interim, only “clarifications” - claims that the leaked contract show not to be true. 

PLATFORM obtained from a reliable source a version of the Rumaila contract with BP/CNPC dated 8 October 2009. On that date, the contract was agreed and initially signed, and then submitted to the Iraqi Cabinet for approval, which was given on 16 October. Apart from any minor changes requested by the Cabinet, we believe this to be the final version as signed.

This leaked version was compared in a briefing published today, ‘From Glass Box to Smoke Filled Room -  How BP secretly renegotiated its Iraqi oil contract and how Iraqis will pay the price’ with the official model contract, dated 23 April 2009, which formed the basis of the first bid round. The report shows that several key changes were made, including:

•  BP could opt to be paid for oil not produced as a result of OPEC quotas or Iraqi infrastructure bottlenecks. In the model contract for which companies bid at the auction, the cost of such scenarios would have been shared by both sides.

•  The threshold for BP’s project expenditure at which Iraqi approval was required was raised from $50m to $100m and tight time limits applied to Iraqis’ ability to check such expenditures are legitimate and not inflated.

Greg Muttitt, author of the report and the recently published book “Fuel on the Fire - Oil and Politics in Occupied Iraq” said:

“The changes that took place behind closed doors at first look like technical details. But look more closely and you see their real meaning: BP, not the Iraqi government, will effectively control future rates of production. This gives the company a stranglehold on the Iraqi economy”.

Kevin Smith, a campaigner from oil industry watchdog PLATFORM said:

“Fully informed public debate and scrutiny are vital to prevent the worst excesses of exploitation taking place when oil contracts are agreed. Whatever pressure BP has brought to bear in these backroom dealings, the changes are clearly to the detriment of the people of Iraq.”

Also revealed today:

In April 2009, just two months before the auction at which BP won the contract, Iraqi Ministry of Oil officials sought training on commercial and negotiating skills - from BP, the very company with which it would be negotiating.

When parliamentarians called the Oil Minister in for questionning on the contract, Iraqi Prime Minister Nouri al-Maliki wrote privately to the speaker of parliament calling for him to block the it, on grounds that the questionning would hold back Iraq’s progress, in a way that would be “in harmony” with recent terrorist bombings in Baghdad.