Iraqi petroleum woes are far from over

Jun 30, 2004 02:00 AM

by David R. Baker

Iraq now exerts more control over its oil resources than it has since the US-led invasion in March 2002. But the country's petroleum woes are far from over. Pipelines and refineries remain under attack from insurgents, eager to starve the young government of its main source of cash.
Prime Minister Iyad Allawi and his ministers may have authority over oil revenues, but most of the money collected so far has already been committed by the former interim Iraqi regime and the US-led coalition for government salaries and reconstruction costs. American companies continue patching damaged oil equipment, although the constant threat of violence slows their progress.

Iraq's recovery, political and economic, cannot happen without a steady flow of oil. But analysts expect no quick fixes for the industry, ravaged by sanctions, sabotage and war.
"This is the government's lifeline," said Jamal Qureshi, an oil market analyst with the PFC Energy consulting firm, who predicted insurgents will continue striking oil facilities to destabilize Allawi's government. "They want to show these guys can't protect their crown jewels," he said.

Iraq's oil industry has not been independent for quite some time. Before the invasion, Iraqi oil revenues went into a UN-controlled fund intended to pay for food and humanitarian supplies for the suffering nation. This was part of international sanctions against Saddam Hussein's government. Right after coalition forces seized Baghdad, Halliburton and other US companies began repairing Iraq's oil infrastructure. Once the industry was up and running, oil revenues were collected in a new fund controlled by the coalition to help pay for reconstruction and to run the interim Iraqi government.
Now, Iraqis will exert more control on the system, but there will still be checks on what they can do. Most of the Iraqi Oil Ministry's foreign advisers, appointed by the US-led coalition that had been running the country so far, will be withdrawn. Four advisers will remain, coordinating with remaining American troops and contractors.

The Iraqi government now has control over oil revenues, which had been managed by the coalition. But that control has limits. A panel with members from the International Monetary Fund, the United Nations and the World Bank still oversees the oil revenue fund.
Much of the fund's money is spoken for. Of the $ 20.5 bn taken in since the US-led invasion of Iraq, less than $ 3 bn has not been committed, said Svetlana Tsalik, director of the Open Society Institute's Revenue Watch, which monitors spending on Iraq's reconstruction.

Iraqi government ministries aren't the only ones using the cash. In the last two months, coalition authorities approved spending nearly $ 2 bn of the fund's money on reconstruction projects, Tsalik said. Allawi and his ministers must honour those commitments, even if they would rather spend the cash elsewhere. The UN resolution recognizing the new government demands no less.
"Even though the new government has control of the oil money, it's a much smaller purse than it was," Tsalik said. "Almost all the money has left the gate."

Questions also have been raised about how the oil money has been spent. A draft audit of the oil fund, commissioned by the international board that oversees it, found loose accounting procedures at Iraqi ministries and resistance to scrutiny among coalition authorities, according to a leaked copy.
As for new oil revenue, the amount brought in will depend on Iraq's ability to beat back or defuse the insurgency. Doing so won't be easy.

After concentrating for months on human targets, the insurgents this spring stepped up their attacks on the oil industry. Mortars punched holes in pipelines. Speedboats packed with explosives tried to ram oil shipping platforms. Some of the attacks were so successful that they essentially stopped exports for days.
A June 16 assault on two pipelines to Basra cut off exports from southern Iraq. The same day, the chief of security for Iraq's Northern Oil Co. was shot and killed on his way to work. The attacks have become so frequent that Arab news channel Al-Jazeera has created a Web page listing them.
The Oil Ministry has shown an ability to recover from each assault. But the insurgents have kept Iraqi officials and the American companies working on oil field repairs from significantly boosting the amount of oil pumped and exported. Before June 16, for example, the country was producing about 2.4 mm bpd. That's roughly the same amount pumped before the war.

Rather than making strides, Iraq's battered oil industry must fight to stay in place. Oil market analyst Qureshi said the Oil Ministry may be able to improve production significantly if it can win a bigger share of the government's budget and pour that money into repairs. Until now, he said, they have been hampered by meagre funding by the coalition.
"These are people who are very good at dealing with harsh conditions, but these are very harsh conditions," Qureshi said. "They've been doing OK with the hand they've been dealt."

Source: San Francisco Chronicle
Alexander's Commentary

Change of face - change of phase

In the period of July 20 till August 3, 2015, Alexander will be out of the office and the site will not or only irreg

read more ...
« August 2019 »
1 2 3 4
5 6 7 8 9 10 11
12 13 14 15 16 17 18
19 20 21 22 23 24 25
26 27 28 29 30 31

Register to announce Your Event

View All Events