Oil blitz 'Iraq's most dangerous moment'

BAGHDAD, Oct. 20 (UPI) -- Increasingly, Iraq's drive to expand its oil and natural gas industry, the country's economic lifeline, is becoming dependent on the government's ability to ensure security and, without U.S. forces, that looks to be a serious problem.

Hussein al-Shahristani, the deputy prime minister for energy affairs, recently observed that a bungled bombing blitz of the Baiji refinery 200 miles north of Baghdad Feb. 26 was "the most dangerous moment since the fall of the Baathist regime" in 2003.

The refinery, which has a capacity of 310,000 barrels per day and is the largest in Iraq, was crippled for three weeks, seriously reducing the supply of gasoline.

Shahristani, a former oil minister who isn't given to hyperbole, said only about one-third of the explosives planted by al-Qaida gunmen detonated.

If all the explosives had gone off, Baiji would have been out of action for months, causing major economic disruption.

Brig. Gen. Moussa Abdel-Hassan, commander of the oil police in southern Iraq, where 65 percent of the country's known oil reserves lie, warned recently that authorities are hardly able to ensure the protection of vital energy infrastructure in the region because of a lack of manpower and advanced security equipment.

These problems will increase as old fields are upgraded, new fields developed, new refineries and export terminals and pipeline networks are built to handle increased production and untapped natural gas reserves open up.

The energy industry suffered heavily during the five-year insurgency that followed the U.S. invasion of March 2003 and the toppling of Saddam Hussein's dictatorship.

The industry remains a vulnerable target, a danger that will heighten as U.S. forces move toward completing a military withdrawal by Dec. 31.

In June, the Zubair 1 oil storage facility in the south was set on fire in a spate of bombings. Security is considered tight at the facility, yet the bombers were able to plant military-grade C4 explosives on four tanks filled with crude without being spotted.

Soon after, four bombs were planted at the Doura refinery south of Baghdad, which has a capacity of 240,000 barrels per day. All were defused.

The Shiite-dominated south is particularly vulnerable to Iranian-backed Shiite "Special Groups" linked to political leaders such as Moqtada Sadr, who a few years ago fought the Americans and the central government.

He has warned there will be trouble if U.S. forces remain past Dec. 31.

If Baghdad allows some U.S. troops to stay on as "training instructors" the region's oil infrastructure would likely be a primary target for sabotage.

The government, desperate to demonstrate it has the security threat covered and thus secure further foreign investment to accelerate the expansion of the energy industry, announced major new projects for the south Wednesday.

Exxon Mobil, BP and Eni of Italy will spend some $100 billion between them to carry out extensive upgrades of the mega-fields they operate, said Thamer Ghadhban, senior energy adviser to Prime Minister Nouri al-Maliki.

The U.S. oil giant will fork out $50 billion on the supergiant West Qurna Phase 1 oil field. The other $50 billion will be spent by BP on Rumaila and Eni on Zubair.

These three fields between them produce around 2 million barrels a day, which accounts for some two-thirds of Iraq's total output of 2.9 million bpd.

They are scheduled to produce at least 6.8 million bpd by 2017.

Ghadhban also disclosed that Exxon Mobil, acting on behalf of other foreign companies like BP, Royal-Dutch Shell and Lukoil of Russia, will lead a $3 billion project to build a water injection plant, to boost production levels in the south.

The Kirkuk oilfields in the north, the core of a dispute between Iraq's autonomy-seeking Kurdish minority and the central government, are also flash points.

The Kurds claim the region is theirs. The government doesn't want to lose the oilfields, while Kirkuk city is also claimed by Sunni Arabs and the Turkomen minority.

Many say an explosive showdown is inevitable because none of the parties will back down.

"Kirkuk is witnessing a deterioration in the security situation," warned Hassan Torman, a Turkoman and head of the Kirkuk provincial council.

"It's possible the attacks will increase when the Americans troops leave."

U.S. forces pulled out of the flash point city of Mosul in the north earlier this month.