Iraqi Oil Exports Restart Despite Pipeline Woes

Google News via Reuters News Wire ^ | Sun June 22, 2003 11:35 AM ET | Asli Kandemir

[Ernest_at_the_Beach]

Iraqi Oil Exports Restart Despite Pipeline Woes
Sun June 22, 2003 11:35 AM ET

By Asli Kandemir

ANKARA (Reuters) - Iraq took its first steps back into the world oil markets since the U.S.-led war when one million barrels of crude oil were loaded onto a tanker at the Turkish port of Ceyhan Sunday.

Post-war looting and sabotage at oil facilities have delayed the resumption of Iraq's oil exports, crucial to the country's recovery after a decade of economic sanctions, and an explosion on a pipeline Saturday was the latest blow. The blast near the town of Hit northwest of Baghdad was blamed on sabotage.

The oil loaded onto a Turkish tanker Sunday had been in storage at the port since before the war and markets are still waiting for oil to start flowing through a pipeline from Kirkuk in northern Iraq to Ceyhan.

"The revenue will be used for the well-being of the people," said Phillip Carroll, the top U.S. adviser on oil in Iraq, at a ceremony attended by Iraqi, Turkish and U.S. officials.

The 600-mile pipeline from Kirkuk to Ceyhan was recently damaged by a fire and explosions but an Iraqi oil ministry official said this week it was back in working order.

Turkish state pipeline company Botas's General Manager Mehmet Bilgic said at the ceremony that pumping from the oil pipeline would start from mid-July.

The tanker Ottoman Dignity loaded one million barrels of oil bound for the Turkish refiner Tupras in the western Turkish cities of Izmit and Izmir Sunday, Anatolian news agency said.

Tupras was one of six companies awarded Iraq's first post-war oil tender.

Some eight million barrels of Kirkuk crude were in storage at Ceyhan which lies at the end of the pipeline from oilfields in northern Iraq to the Mediterranean.

The port was one of the main export routes under Iraq's United Nations oil-for-food program before the war but there had been no loading at Ceyhan since March 20.

Iraq's U.S.-appointed de facto oil minister Thamir Ghadhban said Saturday it would take well over $1 billion and about 18 months to restore the country's giant oilfields to their pre-war capability of three million barrels daily.

Ghadhban said Iraq was now pumping around 800,000 bpd -- 500,000 bpd from the north and 300,000 bpd from the southern fields. Most of that oil is being used for the supply of liquefied petroleum gas and refined products, with excess volume re-injected into the country's reservoirs. Turkish news agency Anatolian said the Spanish tanker Sandra Tapias, with a capacity of one million barrels, was due to take on oil at Ceyhan after the Turkish tanker.

Looting and technical snags have disrupted Iraqi supply and the country is expected to pump one million to 1.2 million bpd by mid-July, well below its previous target of 1.5 million bpd by the end of June, Iraqi officials said last week.

Paul Bremer, Iraq's U.S. administrator, has said he thinks Iraq will export $5.5 billion worth of oil this year. Given that payments occur in arrears, he said this would yield revenue of $3.33 billion to $3.5 billion in 2003.

Bremer did not say what oil price he was assuming. If the price for Iraqi oil averages $25 per barrel and Iraq exports for about 180 days this year, his forecast would imply sustained average daily oil exports of about 1.2 million bpd, which may be difficult to achieve given the problems plaguing the industry.