Energy Source

Oil companies rushed into Iraq, offering to rebuild its huge and dilapidated fields for such low fees (around $2 a barrel) that it made executives wince. Almost every big oil company did it. Executives argued quietly that they hoped Baghdad would remember their generosity in getting the country back on its feet once Iraq was ready to give them a chance to explore for new patches of its oil. The other upside of offering such services for a pittance was that Iraqi politicians gearing up for presidential elections next month may find it more difficult – though by no means impossible – to argue Iraq got taken for a ride from big bad oil and to overturn the deals.

But there is a very big, potentially global, downside people that in the industry are now beginning to quietly admit.

Tullow’s decision to pre-empt Eni’s purchase of Heritage’s assets in Uganda has raised more questions than a US tax return. But there are two central ones more important than any other: Does Tullow have a firm agreement with a major oil company willing to buy half the fields on Uganda’s Lake Albert? and: Who will the Ugandan government side with, Eni or Tullow?

Aidan Heavey, chief executive of Tullow, tried hard to answer the first question when he said: “We are in a position right now that we can talk to the [Ugandan] government about the companies. This suggests that we already have firm offers from major companies.”