Fresh Woes Hinder Iraqi Oil Output
Infighting, Provincial Rifts
Deepen Pipeline Problems;
U.S. Tussles Over Explosives
By CHIP CUMMINS in London and HASSAN HAFIDH in Baghdad, Iraq
February 21, 2006
Iraqi oil production has fallen sharply in recent months amid a series of bureaucratic and political tussles in Baghdad, raising questions about the country's ability to keep its petroleum industry from spiraling further into disrepair.
For more than two years, insurgents targeting pipelines and oil workers have stymied the recovery of Iraq's oil industry. Slow funding from Washington, poor project planning and widespread smuggling and corruption also have hindered the effort.
Iraqi oil officials are now complaining about new problems, including political infighting at the oil ministry and escalating conflicts between officials in Baghdad and those in Iraq's main oil-producing regions. Essential equipment has been held up as Iraqi and U.S. officials butt heads over whether it can be safely brought into the country.
Oil production was shut down during the U.S. invasion in March 2003. By early 2004 Iraq recovered to briefly approach preinvasion production levels, some 2.5 million barrels a day. As the insurgency heated up, those gains faded. Still, Iraq managed to pump an average of 1.8 million to two million barrels a day through much of 2004 and 2005, meeting more than 2% of global oil demand.
But late last year, output started trailing off. In the last three months of 2005, Iraq produced 1.66 million barrels a day, down from 1.96 million a day in the previous quarter, according to the International Energy Agency, the Paris energy watchdog. In January, production sank to 1.5 million barrels a day.
The deterioration deprives Iraq of revenue from oil sales and is one more black eye for American reconstruction efforts. It also is a setback for global oil consumers. World-wide demand is growing and new supply isn't keeping pace, contributing to oil prices of about $60 a barrel. Prices were just under $40 a barrel right before the invasion. Oil futures Friday rose $1.42 to $59.88 in New York on tight supply concerns. Prices rose further in other markets yesterday as violence in Nigeria curtailed some production; New York futures markets were closed for the Presidents Day holiday.
[Graphic]
The Iraqi invasion and aftermath rank as the third-largest cumulative oil disruption since World War II, right behind the nationalization of Iran's oil fields in the early 1950s and the Iranian revolution in 1979, according to Department of Energy estimates. Weather-related disruptions added to Iraq's problems in December and January, slowing ship-borne exports in the Persian Gulf. But Iraqi officials point to a number of new, man-made hurdles.
Rifts have opened up among several political factions vying for control of the Ministry of Oil, slowing strategic planning and freezing progress on new drilling and repair projects. Former Iraq Oil Minister Ibrahim Bahr al-Uloum resigned last month amid a dispute with political opponents in the government who reduced fuel subsidies long used to keep Iraqi gasoline cheap. The portfolio is up for grabs as politicians in Baghdad negotiate over the formation of a government.
Washington has committed to pay about $1.4 billion for oil-sector repairs in Iraq, but less than half of that has been spent. The oil ministry, with an annual budget last year of some $3 billion funded by oil revenue, hasn't signed any contracts for major repair work in the fields recently, according to one Iraqi official familiar with the ministry. Big production deals with foreign companies won't be possible until specific hydrocarbon legislation is hammered out, which won't be easy considering the country's polarized political landscape.
"The lack of competent leadership" has dramatically slowed oil-sector planning, said the official.
online.wsj.com |
