Text 17029, 88 rader
Skriven 2011-04-18 18:33:40 av Robert Bashe (2:2448/44)
  Kommentar till text 16990 av Björn Felten (2:203/2)
Ärende: Oil prices and economics (was: Taxes)
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Björn Felten wrote to WAYNE CHIRNSIDE on Monday April 18 2011 at 07:42:

BF> That Iraqi oil still costs around $4/brl to produce.

"Still"? Compared to what? Prewar cost with the obsolete equipment Saddam had,
that was constantly breaking down? And that had to be completely modernized
after the war before production could be resumed?

Naturally that discounts the massive repairs and modifications necessary due to
neglect and war damage, plus the sabotage during and after the war, presumably
continuing to this day.

BF> Halliburton got themselves a $20/brl concession for five years (I
BF> would be surprised if they haven't manage to extend that).

If the Iraqis produce at $4 a barrel (source, please) and sell to Haliburton at
$20 a barrel (source), it seems to me that _they_ are the ones laughing into
their fists, not Haliburton. The question also arises as to how _much_ oil is
sold at this price. It's not unusual to have tiered prices for such
commodities, you know (or maybe you don't - not much oil in Sweden).

BF> With the present $100-120/brl price that's a *net* profit of $80-100
BF> per barrel -- and who gets to foot that bill...?

Better go back to Economics I and find out what "net" and "gross" mean.

Assuming your figures are correct, which I wouldn't necessarily do, the _gross_
profit may be that high, but the _net_ profit after all expenses of
transportation from the wellhead to the terminal at Rotterdam, plus possible
losses due to theft, sabotage, leakage and the like is a good deal less. Aside
from which, if Haliburton really _is_ buying Iraqi oil for $20 a barrel at the
wellhead, I expect the company also assumed all pumping expenses, which can be
quite hefty.

At any rate, although the trend you assume may be correct - that Haliburton has
a good deal in Iraq - I think your figures are way out of line with reality.
And of course, there's also the "minor" point that oil prices fluctuate. It
wasn't that long ago that the price was running around $50-70 a barrel, and
when you figure $20 at the wellhead plus all expenses, the profit margin
doesn't look anywhere near as good as now.

In a word, your tendentious assumptions are precisely that, you confuse gross
profit with net profit - and as a final note I might remind you that Iraq is
meanwhile again a member of OPEC.

I think you're exaggerating mightily.

Cheers, Bob

P.S. Amusing... just looked at the Wikepedia write-up on OPEC:

http://en.wikipedia.org/wiki/Opec#Responding_to_war_and_low_prices

and saw that the Iraqi production as of January 2007 (no newer figures
published) was all of 1,481,000 barrels. That compared to 9,800,000 barrels for
Saudi Arabia and 2,500,000 barrels for Kuweit. Makes you wonder whether
Haliburton really has such a good deal in Iraq or not.

P.P.S. The Gulf war started in 2003, so a five-year contract would have expired
in 2008 or at the latest in 2009 (your reference to current prices is thus
irrelevant). Not much time to make "huge profits" with destroyed and/or
obsolete equipment in the meantime - and the 2007 figures above give a good
indication of the volumes involved.

P.P.P.S. http://en.wikipedia.org/wiki/Oil_reserves_in_Iraq

"On June 30 and December 11, 2009, the Iraqi ministry of oil awarded contracts
to international oil companies for some of Iraq's many oil fields. The winning
oil companies enter joint ventures with the Iraqi ministry of oil, and the
terms of the awarded contracts include extraction of oil for a fixed fee of
circa $1.40 per barrel.[5][6] The fees will only be paid once a production
threshold set by the Iraqi ministry of oil is reached.

Oil fields contracted include the "super-giant" Majnoon Field, Halfaya Field,
West Qurna Field and Rumaila Field. The East Baghdad Field, situated in part
under Sadr City, did not receive any bids and the Iraqi oil ministry is
considering working the field itself. Oil minister Hussein al-Shahristani told
Iraqi public television that the increasing oil production "would finance
infrastructure projects across Iraq - schools, roads, airports, housing,
hospitals". Iraq's oil deposits hold known reserves of 43 billion barrels of
crude, as well as large quantities of natural gas.[6]"

Note that the East Baghdad field did NOT receive any bids even at a fixed fee
of $1.40 a barrel. So the conditions must be pretty restrictive. The above also
shows that there is no "monopoly" on Iraqi oil.

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