Iraq oil exports to fall as 4 refineries resume output
By Bernie Woodall
NEW YORK, Jan 28 (Reuters) - The shutdown of Iraq's oil refineries, after last month's U.S.-led bombing raids, has raised oil exports briefly, but those exports are likely to soon drop to pre-bombing levels, oil industry experts said on Thursday.
With the shutdown of about 510,000 barrels-per-day (bpd) of refining capacity, Iraq's crude oil exports shot up by a similar amount -- to about 2.5 million bpd last week.
But as the nation's four refineries come back on line, the amount that Iraq ships in the United Nations ''oil-for-food'' program will fall to around 1.9 million bpd and is seen remaining there through April 2000, said the oil experts, who did not want to be named.
Typically, when total shutdowns of refineries are planned for general maintenance, it can take weeks for them to return to full production.
But the 130,000 bpd plant in the southern port of Basra was bombed on Dec. 17 by the U.S., which said it hit the plant's shipping end and claimed it was a major source of Iraq's embargo-busting smuggling of refined products. The other three refineries -- a 285,000 bpd plant at Baiji and smaller ones at Kirkuk and Daura -- were shut as a precautionary measure, the experts believe. Since these four refineries were shut in response to an emergency, they are more likely to experience problems coming back on line, the experts said.
''So it may take even more weeks (from Thursday) until they reach again their full capacity,'' one of the experts said.
The experts didn't know when or for how long the refineries were shut. Iraqi officials at the United Nations on Thursday confirmed that the refineries were shut down, but didn't offer details.
Iraq can currently produce about 2.5 million bpd of crude.
Discounting domestic consumption and shipments to Jordan, that leaves Iraq's sustainable export capacity at 1.9 million bpd, the experts said.
Iraq is allowed to export about $5.256 billion of oil every 180 days in the oil-for-food program. But because of low oil prices and an oil industry ravaged by war and eight years of international sanctions, it is seen exporting around $3.1 billion in the current six-month sales phase, the U.N. officials say.
Iraq wants nothing less than the full lifting of sanctions. Its main adversary, the United States, wants to raise the export ceiling.
U.S. officials point to $600 million from the oil-for-food proceeds that Iraq can use to improve its oil industry as a way to increase oil production and, therefore, raise revenue in the program that buys food and medicine for Iraq's people.
But the oil experts on Thursday said the $600 million in spare parts and equipment will keep oil production from falling rather than raising it.
Of the $600 million for spare parts -- about $10.5 million, or less than 1 percent -- has arrived in Iraq, said John Mills, spokesman for the U.N. oil-for-food program. The next big tranche of spare parts is due to arrive in April, he said.
Mills said the United Nations asked Iraq for permission to survey bombing damage at the Basra refinery, which was hit by U.S. missiles in December, but was refused. The U.S. said it bombed at least part of the refinery to quell smuggling of gasoil through Iranian waters.
The experts painted a picture of a sadly dilapidated oil industry that 20 years ago was state of the art and capable of producing 3.5 million bpd. Before August 1990, when Iraq invaded Kuwait and the oil embargo began, Iraq was exporting about three million bpd.
With little maintenance of its oil fields, Iraq probably is causing irreparable damage to them, the experts said. In an industry that relies on sophisticated computers to monitor oil well fields, refineries, pipelines and storage tanks, Iraq is falling farther behind every day, the experts said.
They said it would take ''billions'' of dollars to restore Iraq's oil industry, but couldn't make a more specific guess.
Equipment is often cannibalized for parts to keep other machines running on the short term in a system that relies on ingenuity and jury-rigging, they said.
And it's impossible to make basic decisions such as how much to drill and how much the oil fields are being affected by water intrusion without sophisticated geological equipment, they said.
''It's very difficult to run an oil field by ear,'' one of the experts said.
Iraq's oil industry is a heavy polluter, the experts said. They stressed the need for repairs that would cut down on noxious effluent from refineries and other facilities.
''Producing wells are operated with little concern for safety,'' one of the experts said.
In a portion of the Kirkuk-to-Yumurtalik pipeline that brings crude oil to the Turkish port of Ceyhan, leaking is commonplace. In places in northern Iraq, oil is collected in lakes and periodically set on fire. Oil from these lakes seeps into the Tigris River and groundwater, they said.
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