All About The Oil

KARIM SAHIB/AFP
Got Grease? A worker tends an aging pipeline near Baghdad

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Industry sources tell TIME that oil-service companies like Schlumberger, Baker Hughes and Halliburton as well as construction giant Bechtel Group could split contracts worth up to $2 billion for getting Iraq's oil infrastructure back in shape. U.S. and European oil conglomerates will scramble for rights to exploit Iraq's oil deposits. But the Europeans are worried that the U.S might see the postwar period as payback time for their governments' foot dragging on the war.

In recent years, the winners in Iraq have been foreign companies that don't abide by U.S. sanctions. Saddam has provided contracts worth $38 billion to firms such as Royal Dutch/Shell, Italy's Eni, Russia's Lukoil and France's TotalFinaElf. But those contracts could be worthless once Saddam is gone.

Russian companies could prosper if their government supports U.S. action against Saddam. The Kremlin has made clear to the Bush Administration its fear that postwar Iraq will pump too much oil, lowering the world price below $18 per bbl.--the level at which Russia's oil companies can no longer make a profit. That has led some industry officials to believe that Washington, eager to secure Moscow's approval for military action in Iraq, has quietly agreed to keep prices from falling too low and to help Russian oil companies win contracts in the new Iraq.

Will Opec Go Bust?
Not anytime soon. In the aftermath of war, Iraq could come under U.S. pressure to quit OPEC, but Baghdad is likely to resist because of its continued interest in maintaining higher prices. OPEC's share of world petroleum output has been slipping, however, from more than 50% in 1974 to about 42% today. And if cash-strapped Iraq eventually decides to boost production as high as 6 million bbl. a day, it could push world prices down sharply. So cheap oil may be on the way, but it could be a long time coming.