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Strategies & Market Trends : Booms, Busts, and Recoveries -- Ignore unavailable to you. Want to Upgrade?

To: elmatador who wrote (52346)	8/17/2004 8:50:01 AM
From: TobagoJack	Read Replies (1) \| Respond to of 74559

Elmat, you said something about oil and infrastructure ? The Unique Vulnerability of Iraqi Oil August 16, 2004 Summary stratfor.com Iraqi militants set an oil well on fire in eastern Iraq on Aug. 16. Although the destruction of a single oil well will not affect Iraqi production, Iraq could for all practical purposes fall off of the global energy map should the tactic catch on. Analysis Militants believed to be loyal to the Mehdi Army of anti-U.S. Iraqi leader Muqtada al-Sadr set an oil well ablaze near the city of Al Amara on Aug. 16. The fire raises concerns that Iraq might be on the brink of a major reduction in its ability to produce and export crude. Al-Sadr first threatened to attack Iraq's southern oil fields Aug. 9 -- just as the U.S. offensive against his forces in An Najaf was picking up steam. An attack credited to al-Sadr's militia succeeded in taking one of the country's pipelines out of service, which reduced exports by some 900,000 barrels per day (bpd). Still, the Aug. 16 attack is the first time the specific threat against the oil fields has been fulfilled. From a production standpoint, the loss of a single oil well -- or even a handful -- is of no large concern in any country. In most places, crude oil needs to be forcibly pumped out of the ground. In fact, the average well in the United States produces only about 10 barrels of oil per day. Not so in Iraq where the oil fields are shallow, large and under high pressure -- and they produce massive amounts of oil. When the last extensive public estimate was done -- before the Iran-Iraq war -- the average Iraqi well produced more than 10,000 bpd. So, although the destruction of a single Iraqi well still accounts for a miniscule portion of total Iraqi production, a systematic campaign to attack Iraqi oil fields by al-Sadr's forces -- or any other militant group with a large enough following -- is a strategy with a quite reasonable chance of success. Oil field fires are serious business. Left unchecked, they will continue to burn as long as an oil reservoir maintains sufficient pressure to fuel a blaze. In the case of high-pressure fields like many in Iraq, this can lead to fire temperatures upwards of 3,000 degrees Fahrenheit at the wellhead. Putting such fires out -- particularly in numbers -- requires specialized skills and specialized equipment. It would also cause massive environmental and health problems in Basra, Iraq's second-largest city, which is just downwind from the southern oil fields. These fields produce some 2 million bpd of Iraq's total oil production, accounting for approximately 2.5 percent of total global production. Iraq could not easily recover from such devastation. The only comparable experience is that of Kuwait in the aftermath of the 1991 Gulf War. As the Iraqi army retreated, it set some 600 wells ablaze. Dozens of highly specialized firefighting teams worked approximately 10 months and extinguished the fires, but not before some 1 billion barrels of crude went up in smoke. Between the cost of contracting the work and repairing the damage, Kuwait has had to cough up some $40 billion. Iraq simply does not have that kind of money sitting in reserve. Today, nearly 13 years after the last Kuwaiti well was extinguished, the clean-up work remains far from complete. Copyrights 2004 - Strategic Forecasting, Inc. All rights reserved.