BAGHDAD, Dec. 23 (UPI) -- Iraq has signed contracts worth an estimated $80 million to repair fragile oil export infrastructure in the south and ready it for expansion.
The Oil Ministry wants to raise oil production from 2.37 million barrels per day to 6 million bpd in 10 years. It's currently exporting 1.76 million bpd, and oil receipts account for nearly all state income.
To meet the output goals, Iraq's oil sector will not only require investment in expanding currently producing oil fields and bring more fields online. It needs to prevent a failure along its southern export pipelines, a loss of 80 percent of oil exports and a catastrophic oil spill in the Persian Gulf.
"This is a long due work that should have been done a long time ago," Deputy Minister of Oil Ahmed al-Shamma told United Press International. "It's the first time we can call companies to work in our waters. Everybody was reluctant to come."
He said $50 million in contracts were signed with two firms, one from Britain and the other from India, to survey the extent of unexploded ordnance and other "hazardous objects" like sunken ships left over since the Iran-Iraq War in the 1980s. The other survey will examine the depth and contours of the seabed, from the shore to the Al-Basra Oil Terminal, which currently loads nearly all the southern oil exports.
Shamma wouldn't confirm the companies' names, but UPI can report British firm Maritime & Underwater Security Consultants will conduct the hazardous-objects survey and India's Coastal Marine Construction & Engineering the seabed survey.
A third contract, with New Jersey-based engineers Foster Wheeler, is for engineering design program management. A news release Tuesday from the U.S. Army Corps of Engineers' Gulf Region Division -- which paid for and completed preliminary work on the project -- said the three contracts are worth a total of $80 million.
Shamma said work will begin next year. The project could total $6 billion and see southern export capacity rise to 4.5 million to 5 million bpd.
This would be a boon to the Iraqi revenue stream and bring Iraq oil production more in line with where the world's third-largest reserves should be. Doing nothing, or not fast enough, could see a significant amount of oil taken out of the world market and possibly spreading through the Persian Gulf to the shores of Iraq, Kuwait, Iran and Saudi Arabia.
A U.S. official familiar with the project called it "the most important oil project undertaken in quite a while." The official, who spoke on background with UPI, said the export pipelines on and offshore are in "very poor condition."
Iraq will export no more than 1.6 million bpd currently from the south, the home of most of its reserves, production and exports, said Shamma. If it does, it risks rupturing pipelines on land or in the sea.
A nearly $2 million, U.S.-funded survey of the southern export infrastructure, contracted to Foster Wheeler, found the pipelines are past their life expectancy and for more than a decade have been in need of serious maintenance and repair, according to individuals with whom UPI spoke.
The U.S. State Department asked Congress earlier this year to transfer $1.6 million from other Iraq infrastructure security projects to this one, called the Southern Export Redundancy Project. This request is based on the earlier Foster Wheeler report.
Shamma and U.S. Embassy-Baghdad officials who spoke with UPI on background said the project will not only fix the ailing twin pipelines, but it will also install new pipelines to enable increased export flow and single point mooring buoys for increased tanker loading.
The officials said the surveys will determine the position of the pipelines, envisioned as three 48-inch lines each with 1.5 million bpd capacity.
The project is a major step for an Oil Ministry criticized for not spending enough of its capital budget. Numerous U.S. government reports in the past year have pegged such expenditures at a small fraction to a quarter of what it was allocated for reconstruction.
"This is a first major project program management contract that they've awarded to assist them," said one embassy official, "a tremendous benefit going forward."
If the pipelines were in perfect condition, Iraq could technically export about 3.5 million bpd from the south. But the lines currently end at the Al-Basra Oil Terminal, and if the weather is calm enough, tugboats purchased by the Iraqi Ministry of Transportation dock tankers coming to collect the Iraqi crude from one of the ABOT's four berths.
The Oil Ministry has complained of insufficient tugboats, and the Iraqi Tankers Co. is attempting to rebuild its own fleet to deliver crude around the world. The single point mooring buoys would allow Iraq to fill more oil orders and in worse weather than current capacity allows.