Will New Oil Deals Provide Jobs For Iraqis?

January 7, 2010

Iraq recently completed the second round of bidding on its oil fields, which will hopefully usher in the return of international petroleum companies to Iraq that will bring in much needed investment and know how. This round went much better than the first with deals for seven of the ten fields up for auction.

Iraq's Oil Minister Hussain Shahristani believes that Iraq could reach 12 million barrels a day in capacity in six years as a result, which would make it a rival to the world's largest producer Saudi Arabia. With such high expectations, many Iraqis, especially in southern Iraq where most of the oil resides, are hoping that this wealth will trickle down in the form of jobs and better services.

Currently southern Iraq has some of the poorest sections of the country despite the huge petroleum reserves. A recent report by the government's Central Organization for Statistics and Information Technology, found that 49% of the population in Muthanna and 41% in Babil lived in poverty, the highest rates in Iraq. Residents of Dhi Qar told Agency France Press that they didn't expect much from the new oil deals, feeling that the best jobs would go to those that had political connections or paid bribes. In contrast, the Italian head of Dhi Qar's Provincial Reconstruction Team, U.S. funded groups that are aimed at improving the political and economic development of Iraq at the local level, believed that there would be plenty of job opportunities, and the complaints about corruption were overblown. Provincial officials in Basra also expressed similar optimism.

If jobs do appear, they will have to be from spin-offs such as construction and services, because it's estimated that Iraq will only need 40,000 new oil workers by 2015. That's a drop in the bucket when compared to the 250,000 young Iraqis who enter the job market each year. In Wasit for example, the sole foreign petroleum company currently operating in Iraq, the China National Petroleum Corporation (CNPC), only hired 450 Iraqis since it started working there in late-2008. They have also been accused of damaging farmland that has set off a wave of protests and small-scale sabotage against the corporation.

The problem as ever is that petroleum is not a labor-intensive industry. There will be a flurry of construction early on to improve the oil fields, which could offer opportunities to Iraqis. After that, probably in the best case, the increased revenues from higher exports will give Baghdad the necessary funds to improve services to placate the public. Otherwise the new oil deals will just give people another excuse to complain about their government.

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