Despite fighting, Iraqi oil industry resumes operation

Bob Tippee

Despite fierce fighting in parts of the country, Iraq's oil industry is nearly back on its achy feet.

Rob McKee, the former ConocoPhillips executive who recently completed 6 months' service as senior oil advisor to the Coalition Provisional Authority in Baghdad, made that assessment in an Apr. 6 telephone conference hosted by Prudential Energy Group LLC.

"The oil industry is basically ready to hand over, I think more or less, on the 30th of June, although much remains to be done in the rest of the country," McKee said, referring to the scheduled transfer of authority to Iraqis.

Oil production is estimated to have exceeded 2.5 million b/d in March, when exports averaged 1.8 million b/d.

Until recently, the only outlet for exports was the 1.6 million b/d Basra terminal in the Persian Gulf. But the bottleneck has begun to relax with the partial recommissioning of the nearby Khor al-Amaya terminal and the important pipeline from northern Iraq to the Mediterranean through Turkey.

Khor al-Amaya can handle 200,000-400,000 b/d, McKee said. The pipeline can carry at most 400,000 b/d.

Other potential export outlets are unlikely to be available soon. They include a recently discussed link to Iranian pipelines and refineries and the reopening of the Iraqi Pipeline through Saudi Arabia (IPSA). Despite repairs needed on the Iraqi side, McKee considers IPSA revitalization "more of a diplomatic challenge than anything else."

As other observers have done, McKee applauded the "miracles" Iraqi technicians performed to sustain an oil and gas industry virtually deprived of investment for 30 years.

"All of you would be appalled if you actually saw" Iraq's oil fields, refineries, and gas plants, he said. "You wouldn't know that that much rust could accumulate on any metal. You wouldn't know that was possible and still have it able to run."

And now it's running under the guard of a security force of 14,000.

Although the Iraqi oil industry needs much work, restoration to the extent described by McKee represents a major achievement.

That it has occurred under the persistent threat of deadly violence makes it thoroughly remarkable.

(Author's e-mail: bobt@ogjonline.com)

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