December 14, 2009 / 10:08 AM / 10 years ago

Oil executives gird for work in risky Iraq

BAGHDAD (Reuters) - They sped into the Oil Ministry in armored convoys, flanked by muscled guards and men in dark suits, but oil executives marked a milestone this week when they attended an oil auction outside Baghdad’s fortified Green Zone.

It was a measure of a broad improvement in Iraq’s security that executives from 35 global oil firms came for the ministry’s two-day bid round in downtown Baghdad, where the landscape is scarred by six years of suicide bombs and other bloody attacks.

Iraq remains a dangerous place, and bombings killed up to 112 across the capital just days before the auction, but top firms showed themselves willing to confront the risks of working in Iraq to get a crack at its huge, easy-to-pump reserves.

“Their profile is going to be raised, and they are essentially putting their head above the parapet,” said one official in the private security industry, requesting anonymity.

Oil firms, used to working in remote or risky areas, will go to great lengths to try to ensure facilities or employees do not become targets for Iraq’s weakened, but tenacious, insurgency.

In the worst years of violence since 2003, holding such a gathering of foreign diplomats or executives outside the bunker-like Green Zone would have been out of the question.

Even today, many Western officials are largely confined to their fortress-like quarters in the expansive Green Zone, visiting the rest of Baghdad only under heavy security.

But as violence has fallen in the last 18 months, embassies have begun to reopen, U.N. agencies have expanded their work and a few foreign oil firms have quietly set up shop.

“Security is an important element,” said Mounir Bouaziz, a senior executive from Royal Dutch Shell (RDSa.L).

“I wouldn’t do anything unless I was convinced we had all the measures in place. We have been in Basra since October 2008. We have been doing work and visiting sites, so we learned a lot about security. Security is about behavior and relationships.”

Shell, like other firms are sure to do, has charted a community relations plan to hire Iraqis for certain jobs, build schools and hospitals and try to create local support.

To help them cope with risk, companies are also hiring private contractors that will provide bodyguards, bomb-sniffing dogs, protection against roadside bombs and much more.

Contractors will also offer advice about how firms can deal with challenges like finding decent medical care or negotiating the formidable political risks that come with working in Iraq.


The December 8 bombings were the third recent attack taking aim at state facilities and the government’s credibility itself.

They are all the more worrying as U.S. troops prepare to withdraw and a political power struggle before March general elections gives rise to worries about resurgent violence.

Prime Minister Nuri al-Maliki is sure to try to capitalize on the success of the new oil deals, which officials hope will bring Iraqi output to 12 million barrels per day, just on the heels of the top global producer, Saudi Arabia.

That could make the oil industry even more vulnerable to attack. But oil firms like to point out that they are accustomed to risk after years on the ground in remote and dangerous areas like Nigeria’s Niger Delta and Colombia.

Doug Brooks, head of the Association of Stability Operations Industry, said Iraq is on a par with Afghanistan in its complexity for security and logistics firms, but perhaps less challenging than more remote or less developed countries like Somalia.

In Iraq today, violence is a regional story. The south, home to most big oilfields, has been mainly quiet since Maliki steamrolled Shi’ite militias in 2008.

The picture is very different in places like Diyala province northeast of Baghdad, where volatility prompted oil firms to pass on oil and gas fields the Oil Ministry has offered.

State-run Sonangal of Angola, whose tolerance for risk may be higher than some western firms, was the only bidder for two fields in northern Nineveh, al Qaeda’s final stronghold in Iraq.

While oil firms’ employees would probably be ferried to and from worksites by car in Basra, Iraq’s southern oil hub, firms may choose to helicopter staff in and out of more risky sites, said Ian Pilcher, an official at G4S Risk Management.

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