API: Iraqi reconstruction progressing despite security problems

Bob Tippee
Editor

NEW ORLEANS, Oct. 21 -- Reconstruction of the Iraqi oil industry has progressed recently despite continuing security problems, government and industry officials reported at American Petroleum Institute's annual meeting here.

Since mid-September, production of crude oil has reached 2 million b/d, and exports have exceeded 1 million b/d, said Gary L. Vogler, deputy senior oil advisor of the Coalition Provisional Authority (CPA) in Baghdad.

Restoration work 'amazing'
Vogler, who has worked in Baghdad for 9 months, described restoration of oil production from heavily sabotaged fields in southern Iraq as "amazing."
And he said Iraq's three main refineries have resumed nearly full operations. The facilities and current capacities are Basra 140,000 b/d, Daura 100,000 b/d, and Baiji 290,000 b/d.

An immediate goal is to restart several 10,000 b/d refineries the Iraqis call "package units" at locations throughout the country.

Another effort is under way to restore operations of parallel product lines along the Strategic Pipeline corridor between a junction west of Baghdad and terminals on the Persian Gulf to accommodate imports of LPG, kerosine, and diesel fuel.

Volger said authority officials discovered that when desperate Iraqis run short of products, "they go and drill into pipelines."

While fortifying security around oil installations and raising crude production, CPA and the oil ministry also are trying to build inventories of kerosine before winter, he said.

Rehabilitation challenges
Thomas A. Crum, chief operating officer of KBR's Middle East Region, praised the military's defense of Iraqi oil installations during the war against former President Saddam Hussein. But he said looting and sabotage have added $7-12 million/day to reconstruction costs.

He said Iraqi rehabilitation has reached the end of an initial phase concentrating on averting a humanitarian crisis. The next step is a transition to self-sufficiency, which might last 16 months.

Because of the huge debt Iraq amassed during wars begun by Saddam, Crum said, the country will need financial assistance from countries other than the US as well as relief from some of its obligations.

One of KBR's current projects is to import and deliver 875 million l. of gasoline, 35 million l. of diesel, and 20 million tonnes of LPG from Kuwait and Turkey.

Acknowledging recent criticism voiced in Congress of fees paid Halliburton Co. unit KBR for imported gasoline, Crum noted the extraordinary hazards of transporting oil in Iraq and said, "The cost that we pass on is actual cost with a very small margin."

Kevin W. Murphy, US Department of Commerce deputy assistant secretary for energy, environment, and materials, said rehabilitation projects completed in Iraq, including those outside the oil industry, total more than 8,000. Iraq, he said, now has more electrical power than it did before the attack to depose Saddam.
Murphy also said security projects alone employ 70,000 Iraqis.

Louisiana coast rescue
Also at the API meeting, Stacy Methvin, president of Shell Pipeline Co., led a panel seeking support of US oil companies for a project to rescue Louisiana's coast.

Channelization of the Mississippi River and its tributaries has reduced sedimentation in the delta so much that more than 1,500 sq miles of coastal Louisiana has subsided into the Gulf of Mexico. Without preventive projects, a further 1,000 sq miles will disappear by 2050.

Robert R. Twilley, an ecologist from the University of Louisiana at Lafayette, said the prevention involves diverting fresh water to wetlands to restore sedimentation.

Louisiana's senators next spring will seek federal funding for a wetlands-rehabilitation project estimated to cost $14 billion.