Iraq’s debt-ridden oil industry flounders

Sabotage attacks on pipelines and increasing fuel prices enrage Iraqis

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By  Jyotsna Ravishankar Published  March 2, 2006

Attacks on the oil industry in 2005 cost Iraq over US $6 billion, said the country’s oil ministry. A total of 186 attacks were carried out on oil sites last year, claiming the lives of 47 engineers and 91 police and security guards, a spokesman said. Issam Jihad, the spokesman, said, “The ministry had estimated the loss at over $6.25 billion,” where direct losses from acts of sabotage against export pipelines cost $2.71 billion, and damage to domestic lines and petrochemical lines amounted to $3.1 billion. Most of the sabotage took place in the northern oil installations, preventing Iraq from exporting around 400,000 barrels per day from its northern oil fields via the Turkish port of Ceyhan, according to Jihad. He said oil well damages were estimated at $400 million, where 138 security and technical personnel lost their lives in a series of 186 sabotage operations carried out in 2005. Oil exports amount to nearly 90% of national budget revenues. Oil is exported through Basra and Kirkuk. Because of frequent attacks, the Kirkuk-Ceyhan oil pipeline has frequently been idle. Iraq is currently producing around two million bpd from its southern and northern oil fields, down by about 800,000 barrels compared with levels before the 2003 invasion. Despite holding the world’s second largest proven reserves, Iraq imports petrol and spiralling costs are causing widespread protests in the country. In a related move, Iraq resumed its import of oil derivatives from Turkey after the latter agreed to reschedule Iraq’s previous debts from importing oil derivatives. An Iraqi oil ministry source said in a press statement that the supply of oil derivatives from Turkey would resume, thus limiting the current crisis. Turkish trade minister, Kursad Tuzmen, said that Turkey rescheduled US $1.02 billion in debts owed by Iraq to Turkish firms for oil products, which they have delivered there. In January, Turkish firms stopped selling oil products to Iraq because of the unpaid debts. “In this framework, the payments will be made in full by the end of the year in equal monthly installments and with a 3% arrears interest,” Tuzmen said after talks with a delegation from the Iraqi oil ministry. Meanwhile, 300 tank trucks carrying fuel had reportedly entered Iraq’s northern borders. Overdue oil debt reaching $600 million was a problem between Turkey and Iraq last year, but Baghdad paid the debt following calls from Ankara. Turkey’s total exports to Iraq stood at $2.8 billion in 2005. But the Iraqi oil ministry said part of the debt had already been repaid, with the rest to follow within days. Iraq imports oil products from Turkey, Iran and Kuwait but it plans to import less because of increased oil refining capacity at home. Fuel shortages, especially of gasoline, have angered Iraqis who already queue up at gasoline stations in Baghdad for hours to meet their needs. Iraq increased state-controlled prices of gasoline and diesel by up to 200% on December, angering Iraqis who are used to paying heavily subsidised prices. This move also prompted the Iraqi oil minister, Bahr Al Uloum, to submit his resignation for a period of one-month.

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