Iraqis rush to repair breached pipeline
Tuesday, July 6, 2004 8:05 AM PDT
By Associated Press
Printable version
E-mail this articleBAGHDAD, Iraq -- Repair crews worked frantically Monday to fix a key southern pipeline after a reported breach by smugglers cut Iraq's exports by nearly half, officials in the state-run South Oil Co. said.
The disruption -- coming about two weeks after exports were halted following sabotage attacks on the two export lines -- heightened concern among traders and analysts about the security of Iraq's oil flow at a time when global supplies are thin.
Oil revenues are critical to efforts by the new interim government to rebuild the country following decades of war and Saddam Hussein's tyranny.
"This is extremely disruptive. ... Sellers are more wary about committing tankers to lift Iraqi crude now," said Conrad Gerber, president of PetroLogistics, Ltd., a Geneva-based firm that tracks tanker ships.
As a result of the attacks and the disruption in supplies, he said, "the market has subtracted Iraqi oil out of the equation ... simply because of volatility in supply."
The line under repair Monday had been sabotaged before, including an attack that shut it down only days before U.S. occupation authorities handed over power last week.
The current disruption began Saturday when the 42-inch pipe was broken open, reportedly by smugglers trying to steal oil, an oil company official said on condition of anonymity.
Iraq is struggling to sustain export levels comparable to postwar levels of slightly over 2 million barrels a day.
The shutdown reduced exports of crude oil from Basra to about 960,000 barrels per day, roughly half the postwar levels there. Exports from Basra account for about 90 percent of Iraq's total, and any shutdown robs the government of tens of millions of dollars in postwar reconstruction revenue.
Damage from sabotage, looters, the war last year and over 30 years of neglect have left Iraq with a dilapidated oil infrastructure, and the shutdown brought into focus mounting concerns about the country's ability to boost exports to over 3 million barrels per day.
Further compounding the uncertainty, Iraqi oil officials have been reluctant to give a clear picture of the impact on exports.
When reports of the problems on the pipeline surfaced Saturday, oil officials sought to minimize the impact, saying it would cut exports by just 1 percent. That level was later revised to 10 percent and then to almost 50 percent.
On Sunday, saboteurs blasted a line running from the north to the south. But oil company officials say the line, which was hit near the town of Musayyib, about 50 miles southwest of Baghdad, has not been used extensively for years and would have no impact on exports.
As of late Monday, there were at least two tankers at the Basra terminal. The tanker Phoenix Voyager reportedly berthed on July 3 and another tanker, the Stena Congress, was also reportedly preparing for loading, said traders.
The Astro Cassiopeia was scheduled to have finished loading Monday, Gerber said.
South Oil Co. officials say the earliest the line is likely to reopen is Wednesday, but add that repairs could drag on to Friday as they replace the broken section of the pipeline. The damage was on a stretch of the line near the town of Faw, roughly the same area where the attacks on both lines occurred last month.
The Oil Ministry has set up a 14,000-man strong police force that will monitor pipelines and other infrastructure, and the government has bought two aircraft to patrol both borders and pipelines. It has also contracted tribal leaders to monitor the pipelines that run through their region.
But until the country is stable and the pipelines secure, multinational oil companies will be reluctant to make serious investments, analysts say.
"Investors aren't really interested in Iraq right now given the security situation and because the new government has yet to win much support or legitimacy from the people," said Muhammad-Ali Zeiny, senior economist with the London-based Center for Global Energy Studies.
"They will wait until after the elected government takes over and hope, that by that time, the proper environment for investments will be in place," he said. "That includes transparency in the way they deal with the market."
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