USA/IRAQ: Three years after U.S.-led invasion of Irag the country's oil industry scrambles to save itself from collapse

Record ID: 345061

  • Title: USA/IRAQ: Three years after U.S.-led invasion of Irag the country's oil industry scrambles to save itself from collapse
  • Date: 18th March 2006
  • Summary: (W5) NEW YORK, NEW YORK, UNITED STATES (MARCH 16, 2006) (REUTERS) (SOUNDBITE) (English) FADEL GHEIT, OIL ANALYST- OPPENHEIMER & CO., SAYING: "Traders have capitalised on the perception of potential supply disruption. Basically I call it the fear premium, it continues to be with us, it's likely to be here to stay."
  • Embargoed: 2nd April 2006 13:00
  • Keywords:
  • Topics: Industry,Energy
  • Reuters ID: LVA3DUB3P67EOZ9BMILNTEF6A2R4
  • Story Text: Three years after the U.S.-led invasion of Iraq, the country's oil exports have sunk to nearly half the level they were under Iraq's former president Saddam Hussein. And, analysts now say Iraq is scrambling to save the vital industry from collapse.
    The oil sector, crippled by decades of war, sanctions and under-investment, was relatively steady before the 2003 war but has since has lurched from one crisis to another. Attacks on energy installations, political wrangling, lack of funds and mismanagement have plagued the energy sector since Saddam Hussein's forces burned oil in pits to stall invaders.
    "Traders have capitalised on the perception of potential supply disruption. Basically I call it the fear premium, it continues to be with us, it's likely to be here to stay," said Fadel Gheit, an oil analyst at Oppenheimer & Co.
    Industry officials say a swift recovery is unlikely in the near future. Many predict that even when political stability is restored, it will take at least 5-7 years to get Iraq's economic lifeline back on its feet.
    "Assuming there is no sabotage, you will have to have a government that is responsible and committed to pursue the needed maintenance and expansion in the infrastructure," Gheit added.
    U.S. officials have said they hope Iraq will by the end of 2006 be able to pump more oil than before the invasion. But even under the crippling international sanctions imposed during Saddam Hussein's leadership, the nation managed to export around two million barrels per day, compared with a rate of just under 1.5 million now and around a million in January.
    Michael O'Hanlon, a research fellow at the Washington D.C. based Brookings Institution said Iraq's economic forecast looks grim in the near future.
    "Iraq has been spending about 10 billion (U.S) dollars a year on subsidies for fuel and other basic food stuffs, the necessities of life and other basic kerosene, diesel, you have, you name it 10 billion a year in a total economy that's only about 30 billion in GEP," O'Hanlon said.
    The oil production problems in Iraq, home to the world's third largest oil reserves, are not expected to turn around soon as armed militant groups have vowed to escalate attacks on oil installations, no new oil fields have been drilled and old ones are still left in despair.
    Iraq-- once a prominent member of OPEC-- finds itself in the position of being a net importer of oil products...paying an estimated $500 million (U.S.) per month just to cover fuel imports.
    At a time when the rest of OPEC is taking in record profits because of extremely high oil prices, Iraq is falling further into debt, impacting the nation's economic growth as well as its political stability.
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