I guess Bush was never briefed on this oil and gas report on Iraq

[MSgt213]

Iraq struggles to maintain exports at pre-war levels
11-03-04 As with the rest of the economy, reality has finally caught up with the perilous state of Iraq's oil industry. The euphoric prospect of Iraqi oil flooding world markets soon after the fall of former leader Saddam Hussein, or oil revenue being more than enough to meet post-war reconstruction costs, is now forgotten.
Instead, Iraq is struggling to raise and maintain production and exports at pre-war levels. Plans for serious development of the upstream sector are contingent on security, a reasonably peaceful transfer of power, the drafting of a permanent constitution and the election of a National Assembly.

This means, in effect, that Iraq's production capacity will rise to approximately 2.8 mm bpd in the near future (with the possibility of shortfalls because of damage to the reservoirs), and will not be able to achieve the much mooted 5 (mm bpd) target until the end of the decade. The only upside is the possibility of bringing in new oil streams from semi-developed fields, raising capacity to a maximum of around 3 mm bpd in the medium term.
There are three possible upstream phases that can be envisioned for the country. The first is to bring production capacity by April 2004 to the pre-war level of 2.8 mm bpd. Work on this program started in July 2003 under the Restore Iraqi Oil plan, drawn up by the Coalition Provisional Authority (CPA), Halliburton and Iraq's Oil Ministry.

Recently, two berths at the Khor al-Amaya offshore facility began operating with a lifting capacity of 400,000 bpd. However, because of a limited draft, tankers can lift only around 1-1.5 mm barrels. The Iraqi-Turkish pipeline has also been tested lately and the tank farm at Ceyhan is being filled gradually with to resume exports from the Mediterranean in the next few weeks, if security permits. Consequently, production capacity has risen to around 2.6 mm bpd, and exports have touched 1.7 mm bpd.
If all these projects go ahead, and are sustained, production at maximum capacity will cause further damage to the fields, over and above what was sustained during the 90s. This would mainly be a result of poor field management practices. There is a growing feeling that a study of reservoirs should be conducted first to determine their status before deciding to sustain production at maximum levels. A tender to undertake such studies has been under preparation, but because of lack of funds has been delayed.

Meanwhile, talks are being held with Iran to build a short pipeline across the Shatt al-Arab to Abadan. The Iranians are pursuing this scheme and have sent a technical team to Baghdad to review the proposed project.
It is not clear where Iraq will garner the extra capacity to export more crude through Abadan that it cannot put through its own export facilities at the Basra oil terminal and Khor al-Amaya. Talks are under way with Kuwait on using the latter's oil export facilities, exporting Iraqi gas and undertaking joint development of fields that straddle the border. The negotiations are still in early stages.

Another main feature of this period is the pursuit of parallel programs by the Ministry of Oil and US authorities. On 16 January, the US Army Corps of Engineers awarded two contracts worth nearly $ 2 bn to continue restoring Iraq's oil infrastructure to pre-war production levels. A north region contract was awarded to a partnership between Parsons of Houston and Worley of Australia, and a south region contract went to Halliburton's subsidiary, Kellogg, Brown and Root.
However, the CPA, which controls Iraqi revenue and disburses financial allocations to the various ministries, has not provided any investment budget for the oil ministry in 2004. The only funds available, besides those for salaries, accrue from approximately 13.3 cents per barrel for operational purposes to the northern and southern oil companies.

The decision came as a surprise to the oil authorities who were banking on investment funds to award tenders to finish the development of a few fields and build modest midstream and downstream projects.
Some of the projects publicly announced by the Oil Projects Company (SCOP) include:
-- development of Khurmala Dome;
-- Hamrin oil field development project;
-- additional development of Subba and Luhais oil field;
-- pumps for a 36 centimetre pipeline between Karkh and Shuaiba;
-- construction of an isomerization unit in the Basrah refinery;
-- supply of line pipe for the project of expansion of oil products depots;
-- supply of fittings and valves for the project of expansion of oil products depots.

In fact, the tenders were posted on SCOP's website and a few companies even bought the information. However, the ministry was surprised late last year to learn that the capital funds allotted to it had been withdrawn. Since then the oil authorities have been trying to find funding.
Last fall, the US state-owned Overseas Private Investment Corp, along with Citigroup, CSFB and BNP, proposed to the Oil Ministry borrowing against future oil sales in order to finance its capex program. The offer involves borrowing $ 1.4 bn to be repaid over three years at an interest rate of 6 percentage points over Libor.

Whether a sovereign Iraqi government would accept to borrow at such high rates currently in excess of 10 % remains to be seen. The issue is now under discussion in Baghdad, but will most probably have to await the transfer of authority to Iraq before a decision is made.
The priority for the ministry in the past few months has been to secure enough petroleum products for the domestic market. The shortfall, which has now been eliminated, was a symptom of the impact of the sabotage on the distribution system, the mayhem in the administration of the country's bureaucracy and the looting and smuggling that characterized the past few months.

http://www.gasandoil.com/goc/frame_ntm_news.htm

[papau]

1. great find - I reposted in Economy!

:-)

[MSgt213]

2. Okay great. I still trying to figure out where stuff should go. Thanks

the article is from last month by the way 25 March.

[damnraddem]

3. Just another Dubya lie in his press conference.

He said something like 'Iraq's oil production is higher than we expected.' Whereas before the war, the Bushistas were claiming that the oil revenues would pay for Iraq's reconstruction.

Of course, Dubya added something like 'we were concerned that the oil fields would be destroyed.' Well, if that is true, then crippled IS better than destroyed. But, in that case, then Dubya lied before the war in saying that there was no danger to the oil fields, that they would be secured intact.

It's not that Dubya wants things both ways -- it's that he wants things ALL ways.