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Blast hampers Iraqi oil exports

Monday, June 23, 2003

KIRKUK, Iraq -- Iraq re-entered the world oil market Sunday with its first shipment of crude since the war, but sabotage and looting along its largest pipeline delayed the flow of freshly pumped oil -- the key to the reconstruction of an economy devastated by sanctions and war.

In a reflection of the vulnerability of the country's decrepit oil infrastructure, a huge fire burned from a fuel pipeline west of Baghdad after an explosion the day before, apparently caused by saboteurs. South of the capital, attackers fired a grenade at a U.S. military vehicle, killing one American soldier and wounding another.

A wave of attacks have killed 17 Americans since major fighting was declared over May 1. Opponents of the U.S.-led coalition also have targeted Iraq's gas and oil network and other infrastructure, hurting efforts to get the country's most valuable resource moving again.

The U.S. chief administrator of Iraq, L. Paul Bremer, acknowledged Sunday to industrialists and political leaders at the World Economic Forum in Jordan that security is a prerequisite for putting Iraq on the road to recovery.

Bremer insisted security was his "first priority," blaming continuing political violence and acts of sabotage on "a very small minority still trying to fight us" that is loyal to deposed President Saddam Hussein.

Alaska model

He also suggested that Iraqi oil revenue could be distributed directly to the country's citizens, as Alaska does with its residents, or placed in a national trust fund to pay for pensions or other social programs.

"Every individual Iraqi would come to understand that his or her stake in the country's economic success was there to see," Bremer said.

Sunday's oil shipment marked a key first step. Iraq has the second-largest oil reserves in the world, and all proceeds from sales are to go into a U.S.-controlled fund for use rebuilding battered infrastructure and an economy devastated by more than 12 years of U.N. economic sanctions.

In neighboring Turkey, Iraqi, U.S. and Turkish officials gathered at the Mediterranean port of Ceyhan for a ceremony launching the shipment. Mohammed Al-Jibouri -- the head of Iraq's State Oil Marketing Organization or SOMO -- said a prayer and then clicked on the mouse of a computer at the terminal.

Workers began loading 1 million barrels of Iraqi crude bought by Turkey onto the Turkish tanker Ottoman Dignity. The cargo was then to be taken to a Turkish refinery on the Aegean coast. Another million barrels, bought by Spanish refiner Cepsa SA, was to be loaded onto a Spanish tanker, Sandra Tapias.

The oil came from 8 million barrels of Iraq crude that have been sitting at the facility since exports stopped March 20. After Saddam's regime crumbled in early April, it had to wait for legal hurdles to be crossed before sales could resume. In May, the U.N. Security Council lifted sanctions on Iraq and recognized the U.S.-led coalition's authority over Iraq and its oil revenue. Then, a bid was held for purchases of the stored oil.

But still unsure is when the spigot will open for Iraq to pump fresh oil by the 600-mile pipeline that runs from the Iraqi oil center Kirkuk to Turkey's Ceyhan port.

It had been hoped that the flow to the port could start as early as Sunday, but sabotage and looting of lines in the north have delayed it by days and possibly weeks.

Iraq is expected to start shipping oil from its other major outlet, the terminal of Mina al-Bakr on the Persian Gulf, next weekend.

Gutted by looters

In the north, the repair of damage from two explosions on the Kirkuk-Ceyhan pipeline was nearly done. But the pipeline's satellite control mechanism -- which automatically adjusts the pressure and flow of thousands of barrels a day through the pipeline -- has been gutted by looters, said Adel Qazas, general director of the Northern Iraqi Oil Company.

"We can operate the pipeline manually, but very crudely and very slowly," Qazas said.

The Army Corps of Engineers and two U.S. companies, Bechtel and the Halliburton subsidiary KBR, are helping the Iraqis get oil flowing again. Oil industry officials here say they'll be able to start pumping out a modest 200,000 barrels per day by the end of the week, a fraction of the 850,000 barrels per day Kirkuk sent to Turkey before the war. The pipeline has a maximum capacity of more than 1 million barrels per day.

Iraq now produces 750,000 barrels a day and Iraqi officials have said they hope to export 1 million barrels a day by the end of June and 2 million barrels a day by the end of the year -- nearly Iraq's prewar production. Some analysts, however, regard those estimates as too optimistic.

"We came here expecting to extinguish oil fires, but the oil wells themselves are in great shape," said Douglas Cox, a civilian oil specialist in the Army Corps of Engineers and part of Team RIO (Restore Iraqi Oil), a 50-member team of American oil industry experts.

"What we didn't expect, what surprised us was the extent of the looting," he said.

Tower of flame

Near the town of Hit, west of Baghdad, the damaged pipeline was emitting a tower of flame after Saturday's explosion, caused by saboteurs from outside the area, according to Hit's mayor, Naim al-Goud.

"They want to make trouble between the American and the people of Hit. We are trying to arrest them," he told The Associated Press.

The pipeline carries gas -- not crude oil -- from Kirkuk to various parts of Iraq to fuel power stations, said Brig. Salam al-Hity, a senior police official in Hit. "We sent fire engines this morning but we couldn't do anything because the fire is bigger than our capabilities," he said, adding that local officials have asked Iraq's oil ministry to halt the flow of gas until the fire is extinguished.


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