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07-15-03, 03:24 AM #1
Cost of restoring Iraq oil production $1.6 billion
Reuters, 07.14.03, 5:32 PM ET
By Jon Herskovitz
DALLAS, July 14 (Reuters) - The cost of restoring the flow of Iraqi oil to prewar levels is estimated at about $1.6 billion and bidding for up to $1 billion in U.S. contracts to rebuild Iraq's oil business is open to companies from a wide array of countries, U.S. Army Corps of Engineers officials said on Monday.
At a conference on the Corps of Engineers' "Operation Restore Iraqi Oil" attended by representatives from about 100 companies held in Dallas, officials said they are hoping to have an award on the U.S. government contracts by mid-October and people on the ground in Iraq in November or December.
Last week, the Corps of Engineers invited bids for two long-awaited oil contracts for the north and the south of Iraq, both which were set at a minimum of $500,000 but could grow to as much as $500 million each over time.
Representatives from several companies said that continuing violence in the country has tempered some of the interest in the contracts, but they expect there to be a long-term need for foreign help in bolstering Iraq's oil production.
Army Corps of Engineers officials said the U.S. Department of Defense will provide security to workers on the ground fixing damaged pipelines, repairing looted facilities or any of the other tasks involved in boosting Iraqi oil production to the prewar figure of 3 million barrels of oil a day.
"The minimum damage caused by the war and the mass looting and targeted sabotage from the war have caused varying levels of damage across the entire oil system," said Col. Michael Schultz, acting commander with U.S. Army Corps of Engineers, Southwestern Division.
U.S. construction giants Bechtel Corp -- already at work on a major rebuilding contract in Iraq -- and Fluor Corp. (nyse: FLR - news - people) have said they would most likely compete for a piece of the work, and sources at the Army Corps say more than 200 other firms have expressed interest as well.
RISKS AND REWARDS
The U.S. Army Corps of Engineers contract replaces a short-term contract that was awarded in March to Kellogg Brown & Root, a unit of Halliburton (nyse: HAL - news - people), the Texas oil company that was once led by U.S. Vice President Dick Cheney. KBR has completed about $285 million in work on restoring the flow of Iraqi oil as of the start of July, officials said.
Including the ongoing work, the total cost of returning to prewar production levels was estimated to reach a total of about $1.6 billion, but that figure could vary upward or downward by 40 percent, the officials said.
Back in March, when the Iraqi war started and U.S. government agencies began discussing plans to rebuild the country, there was a sense there would be a decisive victory followed by American companies moving into Iraq.
If the major battlefield victories were quick, localized skirmishes and continued sabotage by Saddam loyalists now offer a sobering view of the danger and the time involved in rebuilding Iraq.
Bidding on the contracts is open to companies from countries that participated in the war against Iraq as well as companies from those countries that stood opposed to the military action -- such as France. Criteria for consideration include a country's trading relations with the United States.
"We are looking for world-class teams, joint ventures, or companies," said Gordon Sumner, director of contracting for the US Army Corps of Engineers, Southwestern Division.
Jerry Holloway, a spokesman for Fluor, said he expects there to be larger, long-term contracts -- perhaps issued in the future by the Iraqi oil ministry -- likely coming later.
"You don't get this much interest in bidding on contracts in other parts of the world. This is a very visible and unique situation in many ways," Holloway said. (With additional reporting by Andrea Orr in San Francisco)
Copyright 2003, Reuters News Service
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