BAGHDAD — A wave of American companies have been arriving in Iraqin recent months to pursue what is expected to be a multibillion-dollarbonanza of projects to revive the country’s stagnant petroleumindustry, as Iraq seeks to establish itself as a rival to Saudi Arabiaas the world’s top oil producer.
Since the 2003 American-led invasion, nearly all of the biggest reconstructionprojects in Iraq have been controlled by the United States. But manyrebuilding contracts are expected to be awarded as soon as this monthfor drilling hundreds of new wells, repairing thousands of miles ofpipeline and building several giant floating oil terminals in thePersian Gulf, and possibly a new port.
The contracts will beadministered either directly by the Iraqi government or as part ofBaghdad’s oversight of international oil companies that have signedagreements during the past few months to develop the country’s mostpromising oil fields.
There are misgivings, however, about Iraq’sability to adequately monitor contracts that could total $10 billionover the next five years. The concerns have been heightened by theprominent role expected to be played by American companies that havebeen criticized in the past by United States government auditors andinspectors for overcharging by hundreds of millions of dollars,performing shoddy work and failing to finish hundreds of crucialprojects while under contract in Iraq.
Among the companies thathave started sending workers and equipment to the country or have plansto are Halliburton, Baker Hughes, Weatherford International andSchlumberger, all Houston-based oil-services companies, and severalconstruction and engineering giants, including KBR, Bechtel, Parsons, Fluor and Foster Wheeler.
Halliburtonand its former subsidiary KBR, as well as Bechtel and Parsons, havebeen singled out for criticism by the Special Inspector General forIraq Reconstruction for their previous work in Iraq.
The newcontracts will put the companies into direct contact with an Iraqigovernment that has frequently acknowledged its own challenges indealing with corruption and cronyism, and that has a lack ofexperienced managers, adequate enforcement and efficient auditingsystems.
The companies deny intentional wrongdoing in theirdealings in Iraq and say that their experience there and in otheroil-producing countries in Central Asia gives them an advantage.
“KBRhas historic experience on previous oil and gas production projectsranging from Azerbaijan to Kazakhstan,” Heather Browne, KBR’s directorof corporate communications, wrote in an e-mail response to questions.“Our pursuit of additional contracts in the region is based on thisexperience in addition to KBR’s work on Project RIO (Restore Iraq Oil).”
During a conference call with industry analysts in October, David J. Lesar,Halliburton’s chief executive, said that he had visited Iraq and thatthe company was already doing a limited amount of work on oil wellsthere.
“I think you see everybody trying to establish a basethere, and we’re no exception,” Mr. Lesar said. “Clearly, a greatfuture there and one we will participate in — in a big way.”
But others questioned the Iraqi government’s capacity to police thecompanies. “These are for-profit concerns and they are trying to makeas much money as they can,” said Pratap Chatterjee, former executivedirector of an anticorruption group, CorpWatch,and author of a recent book about Halliburton. “What the Iraqgovernment needs is a good system of transparency and accountability,and for someone who knows what they’re doing to oversee the work.Otherwise, they are going to be taken for a ride.”
During thepast several months, Iraq has signed 10 production contracts withinternational oil companies as it tries to increase its oil output froma relatively static 2.4 million barrels a day to as much as 12 millionbarrels a day within six years. Officials said they hoped to drill atleast 430 oil wells during the next two years.
The planned workwill require new pipelines, including as many as three undersea lines,floating terminals, water treatment facilities, pump stations, oilstorage tanks, power plants and possibly a new Persian Gulf port thatmight be needed to handle the increased oil exports.
There willalso be a need for new housing, roads and schools, and workers willneed to remove unexploded ordnance from oil fields and shipping lanes,transport massive oil rigs and use extraordinary amounts of concreteand steel to reinforce the wells.
While American oil companies have enjoyed only modest successin winning oil development deals in Iraq, the numerous contracts signedin recent months have created an enormous backlog of work that leavesBaghdad with limited alternatives to Halliburton and the other Americancompanies that dominate the oil industry services sector.
“Iraq has little choice,” said Joost R. Hiltermann, deputy program director for the Middle East and North Africa with the International Crisis Group,a nonprofit organization that aims to prevent deadly conflicts. “It isdesperate to increase its revenues, almost all of which derive from thesale of oil. But the government has little capacity to monitor the manycompanies that will be involved in rehabilitating its ailing oilindustry, or indeed its own operations. This is a recipe for massivecorruption, but for Iraqi policy makers the cost will be worth it,given the expected massive returns.”
Government officialsmaintain, however, that Iraq’s system of checks and balances will helpit avoid the mistakes made by the United States.
“There areprocedures where if a company breaches a contract or makes errors, theywill be blacklisted from working in Iraq,” said Dr. Sabah A. Shibeebal-Saidi, chief of the Ministry of Oil’slegal and commercial department in the petroleum contracts andlicensing directorate. “But if they are not blacklisted we will dealwith them. We expect oil services companies to do many things in Iraq.”
NeitherHalliburton nor KBR is on the Iraqi government blacklist, and Mr. Saidiand other senior Iraqi government officials interviewed said they hadnever heard of either those companies or of other American ones thathave become household names in the United States because of their workin Iraq.
Halliburton’s former subsidiary, KBR, which was once run by former Vice President Dick Cheney,has won contracts worth more than $24 billion since the start of thewar, giving it vast responsibility for reinvigorating Iraq’s oilsector. Among many other criticisms of the company’s performance inIraq, Pentagon auditors found that KBR had overcharged the governmentby more than $200 million.
Duraid Adnan contributed reporting.