BAGHDAD - An oil pipeline was reported on
fire Wednesday in northern Iraq near the main
Kirkuk-Ceyhan export route. It is the latest in a string
of incidents plaguing the country's oil industry - at a
time when export revenues are badly needed to fund the
country's reconstruction.
Near-daily attacks
last month by militia loyal to radical Shi'ite cleric
Muqtada al-Sadr left Iraqi oil exports at their lowest
point in a year. The United States State Department says
crude oil revenues fell to US$24.8 million a day for
most of August. That is a sharp decrease from $46.8
million a day in July, and the lowest point since
October 2003.
No reliable figures are available,
but Iraqi and US sources say there have been more than
100 attacks on oil infrastructure including pipelines,
administrative offices, offshore facilities and even
trucks carrying oil since the US-led coalition forces
invaded Iraq in March last year.
Iraqi officials
and their US backers have been working hard to protect
the 7,000-kilometer pipeline system from attacks in
order to steady production and export. Oil wells feed
three major refineries in Basra, Baghdad and in Baiji,
northeast of the capital. Oil export is now the only
source of income for a country with an employment rate
of about 50%, a country that is about $100 billion in
debt.
But Iraqi and US officials are eager to
paint a rosier picture of the country's oil future.
Norm Szydlowaski, the senior US adviser to the
Iraqi Oil Ministry, told RFE/RL that while recent
pipeline attacks have temporarily lowered exports, the
ministry has managed to keep volume from sinking
further.
"The answer is in the structure of the
whole system, and it is very much a system. [It is] a
system of pipelines, storage tanks, even out into the
big ships. And there is some ability to adjust. There is
some ability to bring in the ship a little bit later,
keep it a little bit longer. There is some ability
through storage to collect volume while we are waiting
to make a repair," Szydlowaski said.
Before the
war last year, Iraq produced about 2.5 million barrels
per day (bpd) and exported about 1.8 million bpd. It is
said to be maintaining that level of exports. The global
requirement this year is around 82 million bpd.
It is a situation that has left Iraqi oil
officials straining to meet domestic energy needs while
ensuring there are enough exports to bring in
much-needed hard currency. Szydlowaski said Iraq has
been largely able to meet domestic needs by importing
oil from neighboring countries and improving its own
refining techniques.
But exports are a bigger
problem. The Kirkuk pipeline - which traditionally
carried one-third of Iraq's oil exports - has been more
or less shut down by a series of attacks by armed groups
opposed to the US occupation. That pipeline passes
through the Sunni Triangle, the heart of the ongoing
anti-US insurgency, where support for former Iraqi
leader Saddam Hussein remains strong.
Most of
Iraq's oil comes from the southern oilfields and the
country's southern pipeline, until recently, was
relatively safe. But the ongoing conflict between
Muqtada and US and Iraqi forces has led to a series of
attacks that have occasionally hampered exports.
Ibrahim Bahr al-Ulum served as the oil minister
under the US-appointed Iraqi Governing Council before
the power handover in June. He said the government knows
who has been behind the sabotage of the southern
pipeline. "From the south, there is a portion of the
pipeline passing through an area that belongs to some
anti-government tribes. And within that portion, I think
we had nine to 11 attacks," he said.
It is
unclear whether those groups may have worked in tandem
with Muqtada's Imam Al-Mahdi Army militia.
Bahr
al-Ulum said the government has been working to
establish better cooperation with the tribes. But at the
same time, he said it has also formed a 14,000-strong
security force with the specific purpose of guarding the
oil networks and facilities. Bahr al-Ulum says the size
of the force is expected to double in the coming months.
But he and others agree that the ultimate
solution in putting a stop to the attacks against the
pipelines is in improving the country's overall security
situation.
Iraqi and US officials here say there
is a plan to increase production to 5 million barrels a
day by 2010. A more immediate plan - to raise production
to 3 million barrels a day by the end of 2004 - seems
likely to fail because of the continued security
problems.
Meanwhile, before Iraq can raise
production and exports, it will need to spend hundreds
of millions of dollars to upgrade existing facilities.
Szydlowaski said the government has many projects in
mind, but can only afford to implement a handful of
them.
"In terms of the immediate needs, it is
difficult to say which category [is most important] and
how much money [can be spent]. But all in all, the
current budget that the Ministry of Oil is looking at is
roughly in the order of spending $700-$800 million for
2004, and that includes a number of categories. Some of
them are construction projects, rehabilitation projects.
Some of them are security funds. Some of them are
[buying] chemicals that are necessary to run some of the
operations," Szydlowaski said.
Bahr al-Ulum said
the US-led Coalition Provisional Authority that ran the
country until June had promised $1 billion in
investments. But, in the end, he said, only half that
amount was dispersed, causing many upgrade projects to
be delayed.
Iraqi officials are looking now for
investment from multinational oil conglomerates. The
ministry has signed several memorandums of understanding
with major oil companies. "I think that influence of
outside companies and let's say experts in refining or
reservoir engineering is growing," says Szydlowaski.
"There is an increasing outside participation."
That participation has been cautious so far
because of the security situation, he says. "There is
not as much interaction as I would have liked but it
will come. There is tremendous interest in Iraq."
Officials say Iraq is also interested in
developing its natural gas resources, in part to add to
the revenue and in part to relief the pressure of oil
needs.
Copyright (c) 2002, RFE/RL Inc.
Reprinted with the permission of Radio
Free Europe/Radio Liberty, 1201 Connecticut
Ave NW, Washington DC 20036
