Iraq drives to boost oil infrastructure

June 24, 2010 at 12:58 PM   |   0 comments

BAGHDAD, June 24 (UPI) -- Iraq has been criticized for being too ambitious in its drive to quadruple oil production over the next 6-7 years but the Oil Ministry reports that exports increased by around 10 percent in May.

At the same time Iraq is pressing to extend its pipeline network and plans to build four more refineries, part of a campaign to build the infrastructure critics say it lacks if it expects to boost production from the current 2.4 million barrels per day to 10 million-12 million bpd.

Oil Ministry spokesman Assim Jihad said Wednesday that the Iraqis will meet with international oil company executives in Baghdad Saturday to discuss contracts for the four refinery projects.

These are intended to boost national refining capacity by around 750,000 barrels per day, a key component of a $50 billion plan to modernize and expand its long-neglected, war-battered energy industry infrastructure.

Iraq has eight refineries with a combined capacity of 659,000 bpd but these have proven woefully inadequate in meeting domestic requirements since the U.S.-led invasion of March 2003.

The ministry says the new refineries will be at the southern city of Nasiriya on the Euphrates River, with a capacity of 300,000 bpd, Kirkuk in the north at 150,000 bpd, Maysan in the south at 150,000 bpd and the holy Shiite city of Kerbala, south of Baghdad, at 140,000 bpd.

On Tuesday, the Iraqi Al-Ahdab Oil Co. began extending the country's pipeline network to Nassariya and the power production plant at al-Zabiediya north of Kut in Wassit province south of Baghdad.

In 2007, Iraq's parliament approved a law permitting foreign companies to build and operate the new refineries. It's not yet known which companies will be attending Saturday's gathering in Baghdad but Jihad said it will be the first step toward inviting foreign firms to tender for the refinery projects.

The Oil Ministry awarded 20-year production contracts for a dozen oil fields to foreign consortiums in 2009 following two auctions. These companies will invest tens of billions of dollars in upgrading the fields and boosting production.

The ministry says that output has already increased, with exports in May totaling 1.89 million barrels a day, or 58.7 million barrels for the month. That's 9.7 percent more than in April, the first increase in three months.

Jihad said revenue from oil exports in May hit $4.34 billion, with the average price of $73.85 a barrel, April's total was $4.2 billion at an average $79.66 a barrel.

Most of the exports -- 45.1 million barrels -- went through the southern terminal at Basra, with the remainder going by pipeline from the northern fields at Kirkuk to Turkey's Mediterranean terminal at Ceyhan.

The southern fields hold around two-thirds of Iraq's estimated reserves of 115 billion barrels, with Kirkuk the remaining one-third.

Iraq has the fourth largest reserves after Saudi Arabia, Canada and Iran. However, it has vast unexplored fields that industry analysts say could hold another 115 billion barrels.

The drive to expand energy infrastructure will do much to improve Iraq's prospects of reaching its production goals. But many problems remain.

These were exemplified by recent protests, particularly in the oil-rich south, over Iraq's worsening electricity shortages which cause constant power blackouts.

Two protesters were killed in Basra when police fired on a rowdy demonstration. Such was the public fury as the summer heat wave set in with temperatures topping 120 degrees Fahrenheit that Electricity Minister Karim Waheed resigned Tuesday.

Prime Minister Nouri al-Maliki gave Oil Minister Hussein al-Shahristani the electricity portfolio as caretaker while political tensions soared.

Billions of dollars have been spent trying to repair the antiquated power grid since 2003 but most of Iraq's 22 million population only get 6 hours of electricity out of 24 -- less than was available when Saddam Hussein ruled.

The electricity grid, like the energy industry, has been frequently sabotaged by insurgents since 2003.

The fall in oil prices brought budget cuts, with revenue-boosting programs such as upgrading the oil industry getting priority.

This has given fresh impetus to hiking energy revenues as swiftly as possible. But that could still take some time, leaving Maliki, and whoever may succeed him if and when a new government is finally formed, with a major headache.

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