In 2006, a documentary with the title “An Inconvenient Truth” was released to the cinemas which featured the former US Vice President Al Gore as its narrator.
According to Boxofficemojo website, the documentary was an instant hit making it the fifth most successful documentary to date, behind titles such as Fahrenheit 9/11, March of the Penguins, Earth and Sicko.
The documentary however garnered much appraisal as it received criticism. The reason is because the global warming phenomenon is a much controversial topic. In the science world, there are two opposing forces on the issue of global warming.
To understand why there are opposing opinions one must first understand what is interpreted as “global warming”.
According to the Intergovernmental Panel on Climate Change (IPCC), the scientific consensus on global warming is that the average temperature on earth has risen since 19th century and more specifically in the last 30 years, and that the warming is caused by humans due to carbon dioxide emissions and if the trend continues the temperature will continue to rise causing severe climate change and the rise of the sea level.
The opposing scientists however, question whether the warming of the temperature is really caused by humans or simply a cyclical phenomenon that occurs every 30 to 40 years.
Timothy Ball & Robert Carter, both geologists, believe that the global warming phenomenon is not related to carbon dioxide emissions. Ball, states that from 1900s to 1940s there was a warming effect. From 1940s to around 1980s there was a significant cooling effect, but from then on it was once again warming up until 1998.
Carter points that according to IPCC own satellite data statistics, from 1998 onwards there is little indication that earth is warming, in fact, the average temperature in the last decade shows signs of cooling.
These scientists don’t dispute that Earth has indeed suffered a certain warming effect, nor do they dispute that humans do need to lower carbon dioxide emissions because pollution causes health problems. What they dispute is the fact that carbon dioxide emissions cause warming. It is a notion which they deny to be correlated.
The study conducted by UK Climate Impact Programme (UKCIP), to which reports that 800,000 homes in Britain will be in danger of flooding in the next 25 years are projections or predictions of the future climate according to the current data.
UKCIP work very closely with IPCC and they use similar models to project future climate change. However, certain scientist have in the past pointed out that the models used by IPCC to project future climate are incoherent and invalid from a scientific point of view.
Hendrick Tennekes, a retired Director of Research for the Royal Netherlands Meteorological Institute, wrote a piece where he states that he is sceptical of climate models simply because he does not believe that, currently, there are any models used anywhere in the world, including the IPCC models, which can generate “realistic” simulations of future climate.
Truth be told, is that we all have had experiences where we organized outdoor BBQs for the weekend because the meteorological services have said that it will be a sunny day, only to come weekend and it is raining. If meteorological services don’t have the required technology to predict weather in a space of 1 week, how can we possibly believe that the models used by UKCIP can predict weather changes in the next 25 years?
The million dollar question is, do we label these scientists nothing but a group of scaremongers, or can we really afford to ignore the warning signs and do nothing?
24/06/09
Marcelo Alves
Tuesday, 30 June 2009
Is it Really Wrong?
On June 18th an article by Patrick Cockburn, stated that Iraqi Oil Minister, Hussain al-Shahristani, was being criticized for being a sell-out.
Iraq is poised to award a number of licences to some of the world’s largest oil companies which according to the Iraqi government are better equipped in exploring the oil fields than the local oil companies.
The criticism has been strife however, because Iraqis believe that the government is putting the national oil interests in the hands of foreign oil firms.
The main opposition voice has come from Fayad al-Nema, a former director of South Oil Company (a National Iraqi company). His view is that the Iraqi government could lose control of the most strategic resource which is so crucial to the country’s main revenue and survival.
Are these criticisms justified?
In the post-war Iraq, the nationalist sentiment is stronger than ever. The people want to see Iraq rebuild to its former glory, a strong nation in the Middle East. For this Iraq would need the revenue generated from the exploration of oil. Iraqis however want to see this done free from foreign influence.
Most Iraqis believe that the US and British occupation of Iraq was about oil. The opening of the market will only foment these views.
That is however a social-political view. In economic terms can the opening of the market really be construed as a sell-out act?
Let’s review the terms of the contract.
According to Ruba Husari, from Iraq Oil – The Forum website, Iraq is ready to award 6 of the most prized oil fields among the 35 competing international oil companies. The 6 oil fields in question are: Rumaila, West Qurna-phase 1, Zubair, Missan, Kirkuk and Bai Hassan.
The contracts are designated to be service accords of 20 to 25 years, i.e., the companies agree to use the technology at their disposal to build facilities in order to increase the output volume of barrels per day. For this service the Iraqi government will pay the companies an agreed fee instead of sharing the profits of the production.
What this means is that in essence, the Iraqi government retains control of when and most importantly who they sell the oil to for the next 20 to 25 years.
Furthermore, a recent bill was passed where foreign oil firms will be charged with a minimum of 35% corporate tax (the current tax rate is 15%).
Husari points that the petroleum licensing will be divided into 3 categories. First category belongs to the 2 giant oil fields of Rumaila and Kirkuk, which will be reserved to companies with global operations producing more than 500,000bpd. Second category is for all companies bidding for the rest of the oil fields. Third category, is for those companies who don’t qualify to operate on fields but can participate in consortiums led by operators.
This last category allows smaller foreign companies to set up partnerships with the local Iraqi companies. Any joint venture with the state partner will result the state company having 51% majority stake.
Why is the Iraqi government giving out licenses?
Post-war Iraq is a country in turmoil. Rather than being a land of rules, it is a land where chaos rules. Because of its political instability, often state projects will receive unclear objectives and suffer several changes, which can only hamper the execution of those projects.
Also, after several investments by the state, the production levels are still not up to the standard needed. As pointed out by Cockburn, Iraq has already invested $8bn in technology and equipment to improve its current output, but it will need a further $50bn investment in the next 5 years to get the production levels from 2.5milion barrels a day to 6million bdp (the required amount to generate enough revenue for its rebuilding projects).
It has become increasingly clear that the Iraqi government does not have neither the expertise nor the funds required to improve its oil industry. The easiest and fastest solution is to allow foreign direct investment in the country.
Of course it can be argued that Iraqi government could possibly do it without FDI, but it would require a sizable investment which the country at the current state simply cannot satisfy and it would be a prohibitive lengthy process. Time, which Iraq simply cannot afford to wait.
The contracts also seem to be highly in favour of the government. Foreign firms will have to pay a premium of 35% corporate tax. It is a heavy tax duty. The high tax rate will inevitably motivate foreign firms to join partnership deals with local Iraqi companies to avoid the tax rate.
The joint ventures can only benefit the Iraqi companies. These companies will acquire know-how, technology, expertise and gain a more international business ethics that perhaps they currently lack.
Allowing FDI to go in and build the required refineries will speed up the process. According to Husari, the Iraqi government will only start paying the service fees to the foreign firms after the production of oil exceeds the current Iraqi production. The incremental production is expected to come 24 months after the contracts become effective. It is very doubtful that the current Iraqi government could achieve that in less than 2 years without foreign help.
By solving the oil industry’s problems, the Iraqi government can also free itself from one more headache and concentrate its resources solely on the rebuilding of the country, which at the moment seems to be the most critical issue.
Is it really wrong? Or is it just national pride blinding economic acuity?
Iraq is poised to award a number of licences to some of the world’s largest oil companies which according to the Iraqi government are better equipped in exploring the oil fields than the local oil companies.
The criticism has been strife however, because Iraqis believe that the government is putting the national oil interests in the hands of foreign oil firms.
The main opposition voice has come from Fayad al-Nema, a former director of South Oil Company (a National Iraqi company). His view is that the Iraqi government could lose control of the most strategic resource which is so crucial to the country’s main revenue and survival.
Are these criticisms justified?
In the post-war Iraq, the nationalist sentiment is stronger than ever. The people want to see Iraq rebuild to its former glory, a strong nation in the Middle East. For this Iraq would need the revenue generated from the exploration of oil. Iraqis however want to see this done free from foreign influence.
Most Iraqis believe that the US and British occupation of Iraq was about oil. The opening of the market will only foment these views.
That is however a social-political view. In economic terms can the opening of the market really be construed as a sell-out act?
Let’s review the terms of the contract.
According to Ruba Husari, from Iraq Oil – The Forum website, Iraq is ready to award 6 of the most prized oil fields among the 35 competing international oil companies. The 6 oil fields in question are: Rumaila, West Qurna-phase 1, Zubair, Missan, Kirkuk and Bai Hassan.
The contracts are designated to be service accords of 20 to 25 years, i.e., the companies agree to use the technology at their disposal to build facilities in order to increase the output volume of barrels per day. For this service the Iraqi government will pay the companies an agreed fee instead of sharing the profits of the production.
What this means is that in essence, the Iraqi government retains control of when and most importantly who they sell the oil to for the next 20 to 25 years.
Furthermore, a recent bill was passed where foreign oil firms will be charged with a minimum of 35% corporate tax (the current tax rate is 15%).
Husari points that the petroleum licensing will be divided into 3 categories. First category belongs to the 2 giant oil fields of Rumaila and Kirkuk, which will be reserved to companies with global operations producing more than 500,000bpd. Second category is for all companies bidding for the rest of the oil fields. Third category, is for those companies who don’t qualify to operate on fields but can participate in consortiums led by operators.
This last category allows smaller foreign companies to set up partnerships with the local Iraqi companies. Any joint venture with the state partner will result the state company having 51% majority stake.
Why is the Iraqi government giving out licenses?
Post-war Iraq is a country in turmoil. Rather than being a land of rules, it is a land where chaos rules. Because of its political instability, often state projects will receive unclear objectives and suffer several changes, which can only hamper the execution of those projects.
Also, after several investments by the state, the production levels are still not up to the standard needed. As pointed out by Cockburn, Iraq has already invested $8bn in technology and equipment to improve its current output, but it will need a further $50bn investment in the next 5 years to get the production levels from 2.5milion barrels a day to 6million bdp (the required amount to generate enough revenue for its rebuilding projects).
It has become increasingly clear that the Iraqi government does not have neither the expertise nor the funds required to improve its oil industry. The easiest and fastest solution is to allow foreign direct investment in the country.
Of course it can be argued that Iraqi government could possibly do it without FDI, but it would require a sizable investment which the country at the current state simply cannot satisfy and it would be a prohibitive lengthy process. Time, which Iraq simply cannot afford to wait.
The contracts also seem to be highly in favour of the government. Foreign firms will have to pay a premium of 35% corporate tax. It is a heavy tax duty. The high tax rate will inevitably motivate foreign firms to join partnership deals with local Iraqi companies to avoid the tax rate.
The joint ventures can only benefit the Iraqi companies. These companies will acquire know-how, technology, expertise and gain a more international business ethics that perhaps they currently lack.
Allowing FDI to go in and build the required refineries will speed up the process. According to Husari, the Iraqi government will only start paying the service fees to the foreign firms after the production of oil exceeds the current Iraqi production. The incremental production is expected to come 24 months after the contracts become effective. It is very doubtful that the current Iraqi government could achieve that in less than 2 years without foreign help.
By solving the oil industry’s problems, the Iraqi government can also free itself from one more headache and concentrate its resources solely on the rebuilding of the country, which at the moment seems to be the most critical issue.
Is it really wrong? Or is it just national pride blinding economic acuity?
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