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Iraq's oil industry in grip of despair 30.11.2006
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LONDON , November
30, -- The present state of Iraq's collapsing oil
sector, its economic lifeline, is bleak and its
future looks far worse, despairing officials say.
Another damaging oil attack this week, the prospect
of British troops handing over the oil city of Basra
and virtual civil war have all but crushed hope for
Iraqi officials battling to keep exports flowing to
world markets.
"One thing is sure. The worst is yet to come," an
Iraqi oil industry source said by telephone from
Baghdad.
His task is made harder still by gross mismanagement
at the oil ministry and chronic underinvestment in
the vital sector -- already neglected for decades
due to sanctions and wars.
"There is no line of authority at the oil ministry,"
said an oil official in the capital. "We are
crippled. We have the resources and the finances and
we are still failing."
With Baghdad in chaos, technocrats fear the oil
producing regions in the Shi'ite south and in the
north near Kurdistan may seize control of exports
and effectively dismember the country that holds the
world's third biggest oil reserves.
"Our country may be dismantled -- farewell to
central government," the oil source said. "This is
the danger."
Salvation, in the form of an eagerly-awaited oil law
designed to unify the country and lure foreign
investment, is unlikely to arrive by the end of the
year.
Control of the oilfields is dividing Iraq's three
main communities, the Arab Sunni and Shi'ite Muslims
and ethnic Kurds. Sunnis fear autonomous deals by
Shi'ites in the south and Kurds in the north will
cut them out of Iraq's oil wealth.
They, along with the Kurds and Turkmen, are
disputing the status of Kirkuk and its giant
oilfield. A December 2007 referendum will decide
whether Kirkuk city and the surrounding area should
be controlled by the Kurdistan regional government.
"That's the real flashpoint," said Peter Khalil of
Eurasia Group. "The Kurds have de facto taken
control of Kirkuk."
Whoever does lay claim to Kirkuk will inherit an
80-year-old oilfield that pumped 800,000 bpd or
nearly a third of Iraq's output under Saddam
Hussein.
Rates have slowed to a trickle since the U.S.-led
invasion in 2003 as relentless sabotage along the
northern export pipeline to Turkey has kept exports
mostly idle.
The field was dealt another blow on Monday when a
mortar attack ignited nearby oil tanks and cut
Kirkuk production to about 100,000 bpd from 300,000
bpd.
RESTIVE SOUTH
Though plagued by factional fighting, mainly Shi'ite
Basra has largely escaped the sectarian violence.
The southern Rumaila oilfields have provided steady
exports of around 1.5 million bpd for close to a
year.
"The oil flow from the south has been sacrosanct
even with Baghdad falling apart," said a Western
executive at a major oil company. "But will it
last?"
Although more than 7,000 British troops are in the
region, they plan to leave by the end of 2007.
Eurasia Group's Khalil said there was an outside
chance of an attack on oil facilities when British
troops start their hand over. He said, however, the
decrepit state of the south's oil network posed a
bigger risk to oil flows.
"Even if the security situation gets worse, I don't
see the Shi'ites deliberately targeting the oil
infrastructure," he said. "They're not going to
attack their lifeline."
Iraq's production is stuck at around 2 million bpd,
well down on the nearly 3 million bpd hit in the
final days of Saddam and even further from the 3.7
million pumped in 1979, prior to the Iran-Iraq war.
A modest amount of foreign cash could swiftly boost
flows towards four million bpd. But multinationals
will not act without a legal framework and peace
restored.
Senior Iraqi officials were to resume talks to
resolve a dispute over the energy legislation last
Thursday, when bombing in the capital killed 200.
There was no word on progress.
Oil Minister Hussain Shahristani wants to retain a
strong grip with only participation by the
provinces, officials said.
"From a technical and economic standpoint, this is a
reasonable solution," said a senior Iraqi executive.
"But whether that's acceptable to all parties
remains to be seen."
Reuters
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