Pentagon report: Iraq oil budget improving

WASHINGTON, Dec. 19 (UPI) -- Iraq's Oil Ministry is spending more of its capital budget this year than last -- money needed to boost oil production, according to a Pentagon report.

The report, "Measuring Stability and Security in Iraq," released Tuesday by the U.S. Defense Department, said the ministry spent 36 percent, or $727 million, of its $2.4 billion capital budget through Nov. 1.

Iraq's ministries, and especially the all-important Oil Ministry, have been criticized for an inability to put allocated money to use. The Oil Ministry in 2006 spent around 3 percent of a $3.5 billion capital budget.

"The lack of capacity in contracting, the lack of trained budget personnel, concern about corruption and numerous other systemic structural impediments hamper faster execution," the report said.

All federal ministries combined are on track to average executing about 36 percent of their capital budgets, also an increase over 2006.

Iraq's 2008 budget will not be approved until Parliament resumes Dec. 30. The Pentagon report says the process is further ahead than this time last year. The proposed 2008 budget is $48.4 billion, $13.2 billion of which will be dedicated for capital projects, a 31 percent increase over last year.

Iraq's oil sector is currently the single most important income generator. Exports of oil this year through the first week of December are estimated to bring in $35.5 billion, according to a weekly report generated by the U.S. State Department. Oil sales were $31.3 billion last year, accounting for more than 90 percent of the budget.

But while Iraq has increased its production to about 2.4 million barrels per day, up from the post-2003 average of 2 million bpd, its old and battered infrastructure needs investment. The oil sector was misused by Saddam Hussein, and U.N. sanctions isolated it from new technology. The current war has made it hard to make necessary changes as well.

Iraq's oil minister plans to announce a handful of service contracts to international oil firms to fix and modernize some of Iraq's largest fields.

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Ben Lando, UPI Energy Editor

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(e-mail: blando@upi.com)