New York Times - 3 Sep 90

Prof. Robert B. Laughlin
Department of Physics
Stanford University, Stanford, CA 94305
(Copied 8 Jan 09)


The Oilfield Lying Below the Iraq-Kuwait Dispute

Published: September 3, 1990

At the heart of Iraq's dispute with Kuwait over oil, money and boundaries lies a huge banana-shaped oil forma tion some 10,200 feet below the desert sands.

Percentages Set by Formula

Oil formations frequently run be neath political boundaries, whether they involve unfriendly leaseholders in West Texas or neighboring Arab states, and procedures have existed for years to settle disputes that arise. Typically, participants in the same field share both production costs and revenues, using a formula that sets percentages of ownership.

But Iraq refused to negotiate with Kuwait on such an agreement. So Kuwait produced oil from Rumaila with out any agreement, and then adopted a policy of producing far more oil than it was allowed under the quota system of the Organization of Petroleum Exporting Countries. That policy became an other sticking point in relations with Iraq, which contended that the over production depressed oil prices and revenues for all OPEC members.

Iraq had produced oil from the field before it went to war with Iran. Of a total of 615 wells in Iraq, 225 were in the Rumaila field, according to 1986 figures, the latest available, from John S. Herold Inc., an oil industry consulting firm in Greenwich, Conn.

Field Mined During War

But during the Iran war Iraq mined its giant share of the Rumaila field to keep it from falling into Iranian hands, Western political experts say. Kuwait stepped up its total oil production, capturing some of Iraq's customers and pumping millions of barrels from the Rumaila field. After the war with Iran ended in a cease-fire in 1988, Iraq resumed drilling in Rumaila.

Iraq's dispute with Kuwait, has its roots in Britain's decision in 1899 to establish Kuwait as a British protectorate. The Kuwait royal family had ruled the area since 1756, but Iraq still considered it part of its southern province. The dispute flared again more than 30 years ago, shortly after oil was discovered in 1953 in Iraqi territory in the huge Rumaila reservoir. After the Arab League of States established the Kuwait-Iraq border two miles north of the southern tip of the oilfield, Kuwait erected oil rigs on its own territory and drilled into the rich pool below. Kuwait has never disclosed how much Rumaila oil it has pumped.

$2.4 Billion Claim by Iraq

But President Saddam Hussein says Kuwait owes Iraq $2.4 billion for oil taken from the field. In addition to asserting that Kuwait owed Iraq for the oil it had produced, Mr. Hussein told an emergency meeting of the Arab League in May that excessive supplies of Kuwaiti oil in the world market in the last two years had undermined OPEC production quotas and depressed world oil prices. He said that action cost Iraq $14 billion a year, or far more than Kuwait had lent Iraq during Iraq's confrontation with Iran.

His remarks to the Arab League's closed session were reported by the Middle East Economic Survey in an issue that reached American experts after the invasion of Kuwait.

Sounding the alarm over Iraq's mounting grievances against Kuwait, Mr. Hussein told the Arab League that "we cannot tolerate this type of economic warfare," and added, "We have reached a state of affairs where we cannot take the pressure."

Assertions Rejected

In a memorandum to the Arab League dated July 19, Sabah al-Ahmad al-Jabir al-Sabah, the Foreign Minister of Kuwait, rejected Mr. Hussein's assertions about Kuwait's production from the Rumaila reserves. "Kuwait has produced oil from wells within its territory south of the Arab League line and far enough away from the interna tional borders to conform with international standards," he wrote in the memo.

The Kuwaiti royal family did not respond to a request made Friday to a spokesman in Taif, Saudi Arabia, where the family is in exile, for comment on Kuwait's production at the Rumaila field.

Kuwait's overall production in 1989, an average of 1.8 million barrels a day, exceeded its OPEC quota by 700,000 barrels. The Kuwaiti Government's hope was to force Mr. Hussein to the bargaining table, and then extract from him a border truce that included Rumaila drilling rights, as well as a non-aggression pact. Instead, Iraqi troops invaded Kuwait and drove its ruling family into exile.

'Economic Warfare'

Henry M. Schuler, director of the energy security program at the Center for Strategic and International Studies in Washington, said that, from the Iraqi viewpoint, the Kuwait Government was "acting aggressively - it was economic warfare."

"Whether he's Hitler or not, he has some reason on his side," Mr. Schuler said of President Hussein. He added that American officials needed to appreciate the economic and psychological significance the Rumaila field holds for the Iraqis and why Kuwait's exploitation of Rumaila, in addition to its high oil output in the 1980's, was an afront to the Iraqis.

"It's not just the emotional man in the street in the Arab world who finds the Iraq case appealing," he said. "So do many of those who are thinking, intelligent people. If the Iraqi people feel they are the victims of aggression, and that their legitimate claims are being stifled now by American intervention, they will hang in there a lot longer than if that were not the case."

Some Middle East experts dismiss Iraq's complaints about Kuwait's activities in the Rumaila field. They say Mr. Hussein has voiced these and other charges to justify a long-held desire to plunder Kuwait's financial wealth and give his nearly landlocked country control of more than 200 miles of Persian Gulf coastline.

'Only a Smokescreen'

"The issue of oil taken from the Rumaila field is only a smokescreen to disguise Iraq's more ambitious intentions," said Marvin Zonis, a professor of political economy at the University of Chicago's Graduate Business School. "The Iraqis will claim anything to justify the incorporation of Kuwait."

Some Iraqi officials have accused Kuwait in the past of using advanced drilling techniques developed by American oilfield specialists to siphon oil from the Rumaila field, a charge that American drillers deny, noting that the oil flows easily from the Rumaila field without any need for these techniques.

The Kuwait Petroleum Corporation, with headquarters in London, acquired American drilling expertise when it bought the Santa Fe International Corporation in 1981 for $2.4 billion. Santa Fe, based in Alhambra, Calif., has separate divisions that specialize in oil field drilling and rig operations, primarily in offshore areas around the world, as well as in exploration and production, mostly in the Gulf of Mexico, Texas and Louisiana.

Six American Workers

John J. Mika, Santa Fe's vice president of administration, said six Santa Fe employees, all Americans, were among the oil workers captured by Iraqi troops in the early moments of the Aug. 2 invasion. All of the men were believed taken to Baghdad, he added.

The Santa Fe employees worked on several rigs "immediately adjacent" to the Iraqi border, Mr. Mika said. He added that he was unaware of any well that might have utilized the "slant" drilling technique along the Iraqi border.

W. C. Goins, senior vice president of OGE Drilling Inc., a Houston company that provided oilfield supervisors and workers for Kuwait in the same area, said he was "positive" all of the wells his employees drilled and operated ran vertically down to the Rumaila pay zone. "That field crosses the border in north Kuwait," he added. "Iraqis were drilling on one side, and Kuwaitis on the other side."

He said that Iraqi border guards would come over to the Kuwaiti oil wells occasionally and shared the rig workers' lunches - but under Kuwaiti law the workers were not allowed to drink the beer that the Iraqis brought with them, to the Iraqis' delight.

Now those lunches are a thing of the past. Of the 18 Americans employed by OGE in Kuwait, six have been missing since the invasion. At least two were "taken to Baghdad right away," Mr. Goins said.