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 infrastructure.
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
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
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
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.
-- CNNfn's Scott Spoerry contributed to this report.