- Title: IRAQ: Iraq seeks foreign investment to boost its oil industry
- Date: 29th January 2009
- Summary: BAIJI, IRAQ (RECENT) (REUTERS) VARIOUS OF BAIJI OIL REFINERY SMOKE RISING FROM REFINERY VARIOUS OF FLAME FROM FLARE OF REFINERY VARIOUS OF U.S. SOLDIERS GUARDING OIL INSTALLATIONS FLAME FROM FLARE (SOUNDBITE) (English) CAPTAIN MARCUS W. WRIGHT, 2ND BATTALION, 27TH INFANTRY REGIMENT SAYING: "It's just, I can't believe it, almost everyday when I was here approximately two
- Embargoed: 13th February 2009 12:00
- Keywords:
- Location: Iraq
- Country: Iraq
- Topics: Industry
- Reuters ID: LVA76KDU44RNQ0A6GAOXL0DGI3XH
- Story Text: From Baiji to Basra, Iraqis are trying to revive damaged and out dated oil refineries as the war-ravaged country begins to make efforts to encourage vital foreign investment.
As violence begins to decline in Iraq almost six years after the U.S.-led invasion, Baghdad has begun to step up efforts to encourage foreign investment in its vital oil industry.
Iraq has three major oil refineries, all of which are antiquated with their operations being regularly disrupted by theft or sabotage.
Baiji in the north of the country is the biggest refinery with a capacity of 320,000 barrels a day, but it is currently operating at a much lower rate due to antiquated equipment, power outages and fires.
The Baiji refinery is a key transfer point in Iraq's oil infrastructure, pumping crude oil from the country's northern oil fields to the Turkish Mediterranean port of Ceyhan. It also refines crude oil for domestic consumption. U.S. troops now guard the refinery 24 hours a day.
"It's just, I can't believe it, almost everyday when I was here approximately two years ago 2006-2007. There was an attack almost every single day, and now, I've been here for over four months, no attacks whatsoever in my area,'' said Captain Marcus W. Wright, of the 2nd Battalion, 27th Infantry Regiment.
Iraqi officials say stolen gasoline production from Baiji cost the country around $2 billion in 2006/07.
A lot of that money was used to fund the Sunni Arab and al-Qaeda-inspired insurgency against the U.S. invasion, Ali Al-Ubaidi General Director of the Baiji Refinery told Reuters Television.
"In fact, it is difficult for us to evaluate the losses. But the quantities or the disparities between the refineries' productions and the the real numbers of distribution were so big, reaching more than $1 billion in 2006 and I think a similar number in 2007, All these were the result of smuggling, robberies and yes, the financing of terrorism,'' he said.
Iraq's oil ministry has asked foreign companies to submit bids to install surveillance equipment at the plant to help end theft, Ubaidi said.
Sectarian violence between Sunni and Shi'ite Muslims also affected output at Baiji because many workers had to leave the refinery because they were Shi'ites.
"The surge in violence in 2006-2007 has forced the emigration of large numbers of our experts and that has made it difficult for us to operate the refinery,'' Al-Ubaidi said.
However, for the first time since the 2003 invasion, Iraq is refining enough gasoline for domestic transport and the additional investment in Baiji will allow it to eventually resume exports, he said.
One of the old refinery-related contracts being revived dates back to 1988. The contract was put on hold because of the first Gulf War. The $45 million contract for Czech company Chemoprojekt, to install an isometric unit, is half completed and will be finished in 2010, Ubaidi said.
The isometric unit will allow Baiji to produce a super high-quality fuel which is less pollutant.
From Baiji to Basra the story is similar.
In Basra, next to a pipeline snaking across the desert of southern Iraq, villas originally built for an expected influx of foreign oil workers, stand empty.
A faded plaque in Russian and Arabic in the Rumaila North oil field, one of Iraq's two most productive, commemorates the foreign links that once helped Iraq develop its oil industry.
At the Barjisiya oil pumping station in Rumaila South, Iraq's most productive field, the only evidence of foreign input today are General Electric back-up generators and gas processing equipment supplied by Japan's Mitsubishi Corp. A plaque on the equipment dates back to1988.
Three decades of war by Saddam Hussein, international sanctions and finally a violent insurgency unleashed by the 2003 U.S.-led invasion have derailed foreign expertise and investment needed to upgrade the country's oil sector.
Iraq has the world's third-largest proven oil reserves, but its oil sector has suffered from severe lack of investemnt since the 1980s.
The violence that almost tore Iraq apart in 2006 and 2007 has fallen sharply in the past 18 months and the country now believes it is time for foreign firms to return.
Until the foreign companies do return, though, Iraq's oil industry will keep on making do as it has, using infrastructure dating as far back as the 1950s to tap its vast oil reserves and foraging for spare parts in scrap yards to keep the oil flowing.
At South Rumaila, which has an estimated output of 800,000 barrels of crude per day, a lack of equipment means potentially useful gas is burned off in huge flares.
When U.S.-led forces toppled Saddam Hussein, looters stripped much of the decrepit and battered oil infrastructure. Smugglers tapped oil pipelines, and insurgents bombed them to try to hobble the country's fledgling government.
"These fields have been producing for such along time now, these measures should have been taken place for at least the last 15 years but the sequence, as you know the consecutive of wars did not give us an opportunity to do this,'' said Kifah Nouman, the director of Basra's South Oil Co., referring to plans for refurbishment.
But Nouman believes the government is serious about its plans to attract investors, saying what is now needed is money and support from the rest of the world.
"Now, we are at a stage where we need to implement this, the government understands this very well. There has been many committees established to look deeply into this. The pictures are quite clear right now but we need a specific plan to be approved and a timetable that can be implemented and I think we are almost ready now to go and start to implement these things, we need support and we need budget,'' he said.
The country's total capacity at the start of 2003 stood at 3 million barrels per day. In 2008, national output averaged 2.3-2.4 million barrels per day.
In the southern oil fields, which now account for more than 80 percent of Iraq's oil production, leaks from pipelines form occasional puddles of crude. Next to one stretch of pipeline, the state-run South Oil Company has built a workers village, an oasis of comfort in an otherwise inhospitable landscape. - Copyright Holder: REUTERS
- Copyright Notice: (c) Copyright Thomson Reuters 2011. Open For Restrictions - http://about.reuters.com/fulllegal.asp
- Usage Terms/Restrictions: None