The Legal and Ethical Environment of Business - Essay Example

The Legal and Ethical Environment of Business Currently, Iraq is regarded as the world's second largest proven oil reserves, next to Saudi Arabia. In this nation, oil is considered as the most important asset as the whole economy is dependent on its production and exportation. However, it can be recalled that the Iraq oil industry was heavily regulated by the state. Also, maximum production is not attained due to inefficiencies in the economy. Also, the fate of the oil industry is often directly related with the political turmoil and wars which raged in Iraq during the past 25 years (Middle East Economic Survey 2004).
As the oil industry is directly related to the political setting, it is expected that the takeover of the United States and the Coalition forces since 2003 as well as the new constitution in place will create new opportunities for foreign investors. The Iraqi Constitution of 2005 clearly stipulates the provision of business prospects for international oil companies (IOCs). The global policy forum recognizes this: "In the new setting, with Washington running the show, "friendly" companies expect to gain most of the lucrative oil deals that will be worth hundreds of billions of dollars in profits in the coming decades. The new Iraqi constitution of 2005, greatly influenced by US advisors, contains language that guarantees a major role for foreign companies" (Oil in Iraq 2006).
DWI can take advantage of this by pursuing oil exploration in Iraq. This new venture is expected to raise its oil production as well as it revenue and profit. DWI will be able to produce high-grade crude that is extraordinarily cheap to manufacture. In Iraq, discovery and development cost is only $0.5/B and $0.5-$1.0/B, respectively.
As the constitution of the new Iraq government is still under establishment, there are no concrete laws which govern the oil industry. In the Chapter Four of the draft of the Iraqi Constitution, it is stipulated that the government will "administer oil and gas extracted from current field" and "draw up necessary strategic policies to develop oil and gas wealth to bring the greatest benefit to the Iraqi people" (The Associated Press 2005). Thus, even if the IOCs would be allowed to operate in the Iraq, they will be directly dealing with the state concerning their operations. In the case of DWI, it is in an advantageous position being headquartered in Delaware and a US company. It is expected that it will gain a more favorable response because of the US' influence on the government of Iraq.
In operating an oil exploration business in Iraq, DWI needs to consider dealing with various institutions. First, the company needs to closely coordinate with the Ministry of Oil. It should be noted that this institution works on issuing the necessary permits and contracts. Next, DWI also needs to work hand in hand with the local government in the region where it wants to operate in.
Currently, Iraq seems to be a lucrative market for DWI. However, the company should also look at the long-term prospects of the Iraqi oil industry. As oil is often dependent on the political situations in Iraq, DWI should really look into the long-term plans of the government.


References
"Middle East Economic Survey." (2004). Retrieved 21 August 2006, from http://www.mees.com/postedarticles/oped/a47n48d01.htm
"Oil in Iraq." (2006). Retrieved 21 August 2006, from http://www.globalpolicy.org/security/oil/irqindx.htm
The Associated Press (2005). "Text of the Draft Iraqi Constitution." Retrieved 21 August 2006, from http://www.usatoday.com/news/world/iraq/2005-08-24-iraqi- constitution-draft_x.htm Read More