By an OGJ correspondent
NICOSIA, Feb. 13 -- Iraq's oil industry is spiraling into decline due to the chronic lack of new equipment and chemical components, with problems emerging throughout the system from upstream to downstream.
"There is nothing new in the situation," one industry source told OGJ Online, adding that "as long as the parts, supplies, and expertise aren't there, the system will eventually wheeze to a halt."
Another Iraq oil expert told OGJ Online that "a detailed examination of the situation in Iraq is called for, but on the whole, emerging reports are consistent with the UN study" published in March 2000.
In that study, United Nations inspectors said the "lamentable state" of the Iraqi oil industry had not improved since an earlier inspection in 1998 and that an annual production decline of 5-15% "is forecast unless the delivery of spare parts and equipment is immediately accelerated."
The conclusion of UN inspectors 3 years ago appears to remain valid: The Iraqi oil industry continues to adopt high-risk solutions in order to balance the production quantity vs. oil price equation against the necessity to export crude oil, to produce natural gas for domestic use, and to refine products for transportation and power generation.
Water problems
Concern over the quality of Iraqi oil arose in January following reports that export loadings were being delayed due to excessive levels of water in the crude that Iraq pipes from Kirkuk to the export terminal at Ceyhan, Turkey's port on the Mediterranean.
Traders said Iraq was shipping about 750,000 b/d to Ceyhan, but the crude had to rest in tanks for at least 24 hr to allow its water content to settle. That caused the longest backlog in loadings in nearly a decade, traders said.
While the increased water content may reflect stepped-up production in the face of a potential US-led war on Iraq, industry sources said it appears to follow from chronic problems with water injection systems used to increase production from the Kirkuk fields.
UN inspectors in 2000 said Iraq's production of crude oil had increased to 3 million b/d by November 1999, largely through the implementation of water injection programs in the north and south.
On a visit to the Zab River pump station and water treatment plant, the facilities used for maintaining aquifer pressure in the two oil-producing domes of Kirkuk field, inspectors expressed concern over the lack of spare parts needed for equipment to treat the water inflow.
"The delay in arrival of certain spares has resulted in a breakdown of the automatic chemical dosing systems. At present, the aluminum sulfate is introduced at the rate of one 'wheelbarrow per day' to treat 1.1 million bbl, by means of a man with a shovel."
The inspectors warned, however, that "with an oil column of only 30-50 m remaining in Kirkuk's Avanah and Baba domes and a repressured common aquifer, the injection program needs very careful control to prevent water breakthrough along the fracture system in the limestone reservoir."
The chances of water breakthrough were high because the injection systems were "inadequately controlled" and that "owing to lack of communications, the control of the rate of injection to each well—and overall—is entirely run on guesswork."
The inspectors underscored the scenario that appears to have emerged in January, saying that "too high a rate of injection results in the water passing directly into the wells and increasing the percentage of water in the produced crude oil."
Downstream woes
While the water content of Iraqi oil is on the rise, the country's downstream sector is also experiencing problems due to the lack of necessary equipment, materials, and expertise.
Dassar al-Hashshab, general director of Daura refinery in Baghdad, last week announced that the 100,000 b/d facility is running at just 60-70% of capacity due to the lack of necessary materials and equipment.
"We cannot import high-tech equipment that would make it possible to reduce the sulfur content and the use of toluene," Hashshab told reporters in Baghdad. "Many modernization agreements have been signed with Russian companies, but the US is obstructing the implementation of the contracts," he said.
The agreements include contracts to build an associated gas processing facility, improve environmental protection, and reduce the sulfur content in oil products.
Hashshab also said Iraq is short of skilled personnel and literature on new refining technology. Dora, built in 1955, produces gasoline, kerosine, LPG, and lubricants. Most of its output is consumed in the Baghdad region.
In their report, UN inspectors said Daura refinery is in a "deplorable state" compared with European standards and would have been closed as a consequence of the high personnel safety risk and the low maintenance.
"Flue gases were coming out of the walls of the heaters. Fuel, boiler-feed water, and steam were leaking from the supply and product lines. Virtually no control instrumentation is present, with fuel oil leaking everywhere," the inspectors said.
"That the refinery still turns out products from such outdated and heavily cannibalized units is in itself a miracle and has only been possible thanks to the inventiveness and dedication of management and staff," the inspectors said.
They said the main cause of the bad maintenance of the plant was "the lack of spare parts, pumps, compressors, control instruments, maintenance equipment, and measurement devices to make possible quality checks and preventive maintenance."
There were "more than enough examples" to show that the badly maintained state of the units, and the lack of spare parts, will bring a further decline in the availability of process and utility units and unnecessary risks to personnel.
