Oil production in Iraq nearly at pre-war level

Mar 02, 2004 01:00 AM

Iraq's oil industry has undergone a remarkable turnaround and is now producing and exporting almost as much crude oil as it did before the war, according to officials with the American-led occupation and the Iraqi Oil Ministry.
A month ahead of the April 1 deadline set by Iraq and American officials for restoring the industry to pre-war levels, the country is producing 2.3 mm to 2.5 mm bpd, compared with 2.8 mm bpd it pumped before the war.

With additional production increases expected, oil exports this year could add $ 14 bn to Iraq's threadbare budget, in contrast to a little more than $ 5 bn last year, said a senior official with the Coalition Provisional Authority, the occupation government.
"We're well ahead of the targets that we set in the aftermath of the war," said Robert McKee, a retired oil executive from Houston who has been the leading American figure in the drive to restore Iraq's oil fields. "We feel pretty good about it, but we have a lot of challenges left."

Iraq ownsthe third-largest oil reserves in the world, after Saudi Arabia and Canada, and its economy is almost solely reliant on revenue from oil exports. That revenue could help finance Iraq's economic revival, Iraqi and occupation officials say, in turn strengthening political stability as Iraq moves to sovereignty over the next four months. The revival of the oil sector is the result of the $ 1 bn in repairs undertaken by the Americans and Iraqis, as well as some dogged ingenuity by the Iraqis in keeping their badly damaged industry running.
Major challenges still loom, the Iraqi and coalition officials said, especially as the Americans turn over control to the Iraqis ahead of the June 30 date for the transfer of sovereignty to a provisional Iraqi government. By that date, the US military will hand protection of Iraq's pipelines and pumping stations to the Oil Ministry, which will have to manage a police force of 14,000 that is expected to be tested if political instability rises.

After the transfer of power, Iraqi officials and their American advisers must fashion a modern industry from one starved of investment by Saddam Hussein's government and further diminished by the looting of billions of dollars from oil sales under UN sanctions after the Gulf war in 1991.
"I'm not so naive to think there isn't corruption," McKee said. "But we're putting in place things like a code of ethics so that the natural inclination is to honesty rather than lawlessness."

Political tensions that have been underscored lately by Iraq's tortured progress to sovereignty seem to have prompted coalition officials in recent days to highlight what they regard as the accomplishments of the occupation. Lieutenant General Ricardo Sanchez, the American military commander, said that attacks on coalition soldiers had been cut by half in the last three months, even as attacks on Iraqis had increased. And Sanchez predicted that the 110,000-member American force that will remain after the transfer of sovereignty will be able to encounter insurgent efforts to destabilize the country.
L. Paul Bremer, the top American civil administrator of Iraq, appeared on Iraqi television to announce that electricity generation, a major source of discontent in this country of 25 mm people, had been restored to pre-war levels and was expected to rise rapidly as summer approaches. Later, coalition officials turned the spotlight on the oil industry, where problems have often seemed emblematic of the wider deterioration of conditions in Iraq under the US occupation.

In December, Iraqis fumed as they waited in lines for gasoline at stations across the country, a problem that American officials now say had more to do with a lack of electricity to pump oil through pipelines and operate gas stations than with a shortage of supplies.
American efforts to restore Iraqi oil have been led by the Army Corps of Engineers and its principal contractor Halliburton, along with advisers to the Oil Ministry drawn from the top echelons of the international oilindustry. Chief among these is McKee, a former executive vice president of worldwide operations for the old Conoco. His main job here has been oil adviser to Bremer.

Still, Americans give much of the credit for the restoration of the oil industry to the Iraqis themselves, saying that the removal of a corrupt elite who led the industry under Saddam left a work force of 35,000 well-trained Iraqis.
But US financing has been crucial. A further $ 1 bn is expected to be spent this year, McKee said, mainly on restoration and upgrading of oil fields and refurbishing of refineries.

Source: Washington Post
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