Stolen tankers, U.N. sanctions throw kink in flow of Iraqi oil

Friday, April 25, 2003

DOHA, Qatar -- U.S. oil engineers predicted Thursday that about 8 percent of Iraq's prewar oil production will be pumping again within days -- enough to satisfy as much as three-quarters of domestic consumption.

But a host of hurdles remains to ramping up production enough to bring in much-needed reconstruction money.

"I hope we're looking at months," said Gary Dogler, an oil adviser with the Office for Reconstruction and Humanitarian Aid.

"It means a heck of a lot to the economy."

Before the war, Iraq was pumping about 2.5 million barrels of crude a day. The taps were turned off in mid-March ahead of the war.

With pomp and ceremony, coalition-led oil crews restarted the flow Wednesday from four southern wells.

U.S. Maj. Gen. Carl Strock, an oil engineer with the Office for Reconstruction and Humanitarian Aid, announced Thursday the reopened line was pumping about 175,000 barrels a day to a refinery in the southern city of Basra.

He said an additional 60,000 barrels a day would start flowing from northern oil fields around Kirkuk "in the next day or two."

The combined flow of 235,000 barrels a day accounts for a good portion of domestic needs.

While figures are vague, Iraq consumed about 250,000 to 300,000 barrels a day before the war, according to Office for Reconstruction and Humanitarian Aid official Clarke Turner.

But distributing that oil throughout Iraq is difficult, Turner said. Tanker trucks have been stolen, offices have been looted and a downed communication system makes it hard to take orders.

Equipment theft and unexploded ordnance also plague efforts to secure the sources of oil, especially in the southern Rumeila oil field, one of Iraq's largest.

"There's ordnance everywhere. It's a major problem," said Dicky Robichaux, a customer liaison with Houston-based Kellogg, Brown & Root, which has been contracted to do much of the oil field repair work in Iraq.

Wednesday's inaugural oil flow was delayed to the Basra refinery because unexploded ordnance was lying next to one of the pipelines.

Twelve wellheads in the Rumeila oil fields were believed to have been sabotaged by retreating Iraqis, who blew up some and set fire to others. The fires are out, but workers are still assessing which wellheads can be salvaged.

Robichaux said the southern fields need to be thoroughly checked before more wells can be opened to pump additional oil.

The coalition says it will take six weeks to four months to get the southern oil fields back up to producing 1.1 million barrels a day. When rebooted, the northern fields near the town of Kirkuk can chip in up to another 900,000 barrels a day.

The U.S.-led interim administration in Iraq wants to sell that excess capacity and use the revenue for Iraqi reconstruction.

But U.N. sanctions currently prohibit Iraq from using oil revenues to buy anything other than food, medicine and other humanitarian supplies.

President Bush has called for immediately lifting all sanctions against Iraq, but the U.N. Security Council is divided on the issue.

And even if U.N. sanctions are set aside, there is no government in place to guarantee sales contracts, drilling rights or collect and spend the proceeds, analysts say.

"There's no legal, political and banking structure for selling it. The political decision-making ... is what's blocking oil sales right now," said Jan Stuart, an oil analyst with ABN Amro in New York. "There are a legion of questions that remain."

Retired Lt. Gen. Jay Garner, who leads the U.S.-backed interim administration, said Thursday that a "governmental process" will be up and running by late next week.

The power vacuum in Baghdad has cast a chill on some foreign firms that could help jump-start Iraq's oil-driven economy with investment.

The chairman of Royal Dutch Shell Group, Philip Watts, said his company was being "very careful and prudent" about Iraq.

Shell doesn't have any operations there and won't seek any "until we can come to a long-term arrangement with a legitimate authority," he said.

Respond to this story

Posting a comment requires free registration: