Iraq recently held its oil and gas auctions. Despite persistent belief to the contrary, and despite the fact that the energy companies threatened to not participate, or asked for higher revenues, guess what happened? They bid in, an accepted the government rates in many cases.
A few areas are still too hot for the companies to enter. Too many attacks, too risky, too expensive. But the calmer areas still received bids, even if it was only a single bidder.
My advice to the Iraqi’s? Hold out.
Norway did it in the 1960s. They wanted vastly higher prices than most analysts and companies considered realistic, in an area that was considered too environmentally hostile to drill.
Guess where the Norwegians are today – one of the richest countries (both per capita and in gross wealth) in the world, with plenty of oil still left, with areas farther north considered for exploration. By wise management and ensuring that Iraqi objectives are met for what they want to do with their oil revenues, Iraq could truly transform the country into something amazing. However, if typical petro- politics and economics are allowed to prevail, they will lose out big compared to what they could have.
Iraq owns precious resources that are in high demand. As such they can extract a high price, but wise management is needed to balance the economy between oil revenues and economic transformation.