Iraq rebuilding contracts awarded
Halliburton, Stevedoring Services of America get government contracts for early relief work.
March 25, 2003: 4:33 PM EST
By Mark Gongloff, CNN/Money Staff Writer
NEW YORK (CNN/Money) - The first contracts for rebuilding post-war Iraq have been awarded, and Vice President Dick Cheney's old employer, Halliburton
Co., is one of the early winners.
The Kellogg Brown & Root (KBR) unit of Halliburton (HAL: up $0.54 to $20.66, Research, Estimates), of which Cheney was CEO from 1995 to 2000, said
late Monday that it was awarded a contract by the U.S. Army Corps of Engineers to put out oil fires and make emergency repairs to Iraq's oil
President Bush Tuesday asked Congress for $489.3 million to cover the cost of repairing damage to Iraq's oil facilities, much or all of which could
go to Halliburton or its subcontractors under the terms of its contract with the Army.
Cheney divested himself of all interest in Halliburton, the largest U.S. oilfield services company, after the 2000 election.
Halliburton wouldn't speculate about the total monetary value or duration of its contract, under which it will put into action some of the
firefighting and repair plans it outlined for the Army in a study it conducted in November.
"KBR's ... contract is limited to task orders under the contract for only those services which are necessary to support the mission in the near
term," Halliburton spokeswoman Wendy Hall said.
The Army Corps of Engineers told CNN Tuesday that Halliburton would be paid on a "cost plus" basis, meaning it would be reimbursed for the costs of
its work and would get a certain percentage of those costs as a fee.
Since it's still unknown how much damage has been or will be done to Iraqi oil fields in the war, it's difficult to estimate the contract's
eventual dollar value.
But its biggest value could be that it puts Halliburton in a prime position to handle the complete refurbishment of Iraq's long-neglected oil
infrastructure, which will be a plum job.
Getting Iraq's oil fields to pre-1991 production levels will take at least 18 months and cost about $5 billion initially, with $3 billion more in
annual operating expenses, according to a recent study by the James A. Baker III Institute for Public Policy at Rice University, named for the first
President Bush's secretary of state during the first Gulf War.
"Certainly Halliburton would have the lead [in the competition for that job], even absent this contract, given the size and scope of their current
operations," said Pierre Conner, an analyst with Hibernia Southcoast Capital. "But there's no question they'll start with some footprint there. It
clearly puts them in the position where they will know more about the situation and have a bit of an operation there."
Though none of the potential administrators of such a contract -- including the Defense Department, the State Department's U.S. Agency for
International Development (USAID) and the United Nations -- have claimed responsibility for handing out the job, Monday's award and Bush's request
for funding seem to indicate the U.S. government will be in charge.
Halliburton said it has subcontracted the firefighting portion of the Army contract to Houston-based companies Boots & Coots International Well
Control Inc. (WEL: up $0.06 to $1.16, Research, Estimates) and Wild Well Control Inc., a private company.
Hall of Halliburton said all oil fires should be put out within 240 days. Very few oil wells have been set ablaze by Iraqis so far, in contrast to the
first Gulf War in 1991, when Iraqi troops retreating from Kuwait set fire to more than 700 Kuwaiti oil wells. Halliburton's KBR unit was involved in
putting out the 1991 fires.
Separately, USAID late Monday awarded a $4.8 million contract to Stevedoring Services of America (SSA), a private company based in Seattle, to manage
the Umm Qasr ports in southern Iraq.
Umm Qasr's ports, where U.S. and British troops have struggled for full control, are seen as critical to efforts to bring humanitarian relief to
Iraqis. SSA will handle several tasks, including assessing the need for dredging and repairs to the ports, and unloading and warehousing cargo.
USAID plans to issue seven other contracts, including one for $600 million for general construction work in post-war Iraq. Halliburton is among
several companies reported to have put in bids for that contract.