Posted on 03/28/2003 9:14:39 AM PST by Stand Watch Listen
It will take about three months for Iraq's big southern oil fields to start exporting again, a British commander predicted, suggesting that the global petroleum industry could be pinched by an outage of Iraqi supplies for longer than many analysts had anticipated.The handful of blazes that erupted amid war in Iraq's prize Rumeila fields are steadily being put out. But the commander of British forces in the Persian Gulf said Thursday it would take time and about $1 billion to repair the fields. "They are in terrible condition," said Air Marshal Brian Burridge. "It will take three months, and then we can begin pumping oil," he told reporters in As Sayliya Camp, Qatar, a center for the U.S.-led coalition forces. British forces are holding southern Iraq as U.S. forces have moved north toward Baghdad.
Many in the oil industry had been counting on a resumption of exports within weeks after the early U.S.-British seizure of Iraq's key southern oil fields, which account for roughly 60% of the country's output. Iraq has the world's second largest oil reserves after Saudi Arabia.
Industry analysts are wondering what reason there might be for a delay of months in restarting Iraq's southern fields, especially since firefighters are reporting that they can put the oil-well fires out fast. "There could be sabotage of pumping stations or other surface facilities that may need to be fixed," suggested Leo Drollas, deputy director of London's Centre for Global Energy Studies.
The longer-than-expected time frame helped push oil prices higher Thursday. The benchmark futures contract on the New York Mercantile Exchange closed at $30.37 a barrel, up $1.74 a barrel. Oil prices have risen 13% this week, spurred by stiff Iraqi resistance in the war, but are still down from a recent peak of $39.99 a barrel late last month. A delay in the resumption of Iraqi exports, which comes on top of a loss of about 40% of Nigeria's oil output due to political violence in that country, has raised a longer-term prospect for tight global oil supplies and higher energy prices. Until recently, Iraq and Nigeria each produced two million barrels of oil a day, or a combined 5% of global demand.
Other members of the Organization of Petroleum Exporting Countries, notably Saudi Arabia, are shipping more oil to offset the Iraqi and Nigerian shortfalls. But inventories of oil and refined products such as gasoline are low, notably in the U.S., the world's largest oil market. OPEC is now pumping flat out. That means consuming countries might have to draw on their strategic stockpiles of oil should another significant oil-supply disruption occur elsewhere.
The Iraqi export delay also could be compounded by political disputes. As the U.S. hands out contracts to American companies to repair Iraq's oil infrastructure, France and Russia are fighting for a place in the reconstruction by insisting that the United Nations have overall responsibility for the work.
The U.S. moves are irking Russia, whose companies have U.N.-approved contracts to drill wells, including some in the Rumeila field, and do maintenance work. "We are currently working on the immediate return of Russian firms ... to the country as soon as peace is restored," Russian Energy Minister Igor Yusufov said Thursday. "They should return to their projects, evaluate the situation with the equipment left and start working."
Russia companies, such as OAO Tatneft, also have U.N.-approved contracts to drill in Kirkuk, Iraq's giant northern field. Kirkuk is in Iraqi hands, and it remains unclear whether the field will be seized undamaged by the U.S.-British coalition.
Send for experts from Houston.
The UN also gets a 2.2% administrative fee on ALL oil sales, plus other expenses for controlling the program.
In 2000, Iraq sold approx $17.8 Billion in oil and the UN pocketed more than $520 MM in fees. Many British and US staffers have been complaining that this has created a financial conflict of interest on the part of the UN - the UN has become addicted to the Iraqi cash.
Disclaimer: Opinions posted on Free Republic are those of the individual posters and do not necessarily represent the opinion of Free Republic or its management. All materials posted herein are protected by copyright law and the exemption for fair use of copyrighted works.