Iraq, Iran sign pipeline deal

BAGHDAD, May 22 (UPI) -- Iraq agreed to increase oil exports directly to Iran via a new pipeline in the south, though export capacity in the north remains stuck.

Iraq Oil Minister Hussein al-Shahristani and Hasan Kazemi Qomi, the Iranian ambassador to Iraq, struck the deal, according to a top ministry spokesman.

"The two agreed to lay the oil pipeline from southern Iraq to Abadan region in Iran in order to export more than 200,000 barrels per day of Iraqi crude oil to Iran according to crude oil international prices," Issam Jihad told reporters.

The Voices of Iraq news agency reports the oil will be used in Iran's refineries.

While Iraq has 115 billion barrels of proven reserves, the third-most in the world, production is struggling at 2 million barrels per day and exports at 1.6 million bpd. This is caused not by a lack of export capacity, at least in the south, but by old, misused and often attacked infrastructure.

Tens of billions of dollars are needed to fix the system, which has suffered under the current occupation and its fighting, and Saddam Hussein worked the sector too hard without proper upkeep. Pre-war production was around 2.6 million bpd and experts say the sector could handle much more.

All of Iraq's exports come from the south, mostly from the Persian Gulf port of Basra.

A pipeline in the north, from Kirkuk to Ceyhan, Turkey, has been attacked so often it is no longer considered viable.

The investment would come from Iraqi coffers or foreign firms. Oil revenue funds more than 93 percent of the federal budget, though much of it goes to security. International oil companies are waiting for the Parliament to pass an oil law before it knows what access it has to the oil.