News that Iraq's oil is now beginning to flow again at pre-war levels is good news for Iraqis. Whether or not it is really good news depends on how much of the profits from a new boom in Iraqi oil stay within Iraq and are poured into rebuilding the country and the economy :
Buried beneath the surface are the pipelines that carry Iraq’s liquid gold – crude oil – from Kirkuk’s giant oil-fields 50 miles (80km) down to Baiji, and then up to Turkey for export to the energy-hungry West.
The US Army Corps of Engineers began building this $30 million (£15 million) Pipeline Exclusion Zone (PEZ) between Kirkuk and Baiji last July, and will finish it next month. It has already reduced dramatically the number of attacks by those Sunni insurgents who have been waging a second, less-noticed war over the past four years – not against US troops or Shias but against the oil industry on which Iraq’s entire economy depends.
As a result, that industry is displaying unmistakable signs of recovery for the first time since the US invasion of 2003. Exports have risen almost to prewar levels, and with Iraq sitting on 113 billion barrels of proven reserves – the third largest in the world – that is welcome news not just for Baghdad but for a world reeling from record oil prices.
The PEZ is only one measure taken by the US and Iraqi authorities to secure the Kirkuk to Baiji pipelines. They have also replaced Sunni and Shia soldiers with more aggressive, trustworthy Kurds such as Private Mustafa, and removed the 3rd Strategic Infantry Battalion which was, say US army officers, “deeply corrupt”. Its locally recruited members were almost certainly working with the insurgents – telling them when the oil was flowing, helping them to steal it, even staging fake assaults on their own positions to conceal their duplicity.
The huge 46-inch wide pipeline that carries the crude 180 miles north from Baiji to the Turkish border is too long for a PEZ and a little less secure – 14 guards have been killed since September. But even there attacks have been greatly reduced, largely through coopting local tribes by giving their young men jobs in the Oil Police, the revamped, 31,000-strong mini-army that protects Iraq’s oil infrastructure.
The results of this improved security are startling. The pipeline to Turkey was operational just 17 days in the first seven months of last year, and every day but five in the last quarter. Two-thirds of the 48 million barrels of oil exported from Kirkuk last year were exported in those last three months alone. A second $100 million PEZ will be constructed this year to protect the 130-mile line from Baiji to Baghdad.
Kirkuk accounts for roughly a third of Iraq’s oil production. Fuelled by its recovery, Iraq is producing an average of 2.4 million barrels a day – just below its prewar level of 2.6 million – with the Oil Ministry confidently predicting an output of 3.5 million by next year. That would match the level Iraq last achieved in 1979, just before the Iran-Iraq War. “It’s an ambitious goal, but it’s possible,” said a US official closely involved with the industry.
Thanks to rising oil production, the International Monetary Fund believes that Iraq’s battered economy will grow 7 per cent this year. And with oil prices near record highs, the US Special Inspector for Iraq this week forecast a $15 billion windfall for a country whose $48 billion budget for 2008 was calculated when oil, which accounts for 90 per cent of its revenues, fetched a mere $55 a barrel.
US officials say the Iraqi Government now has far more money than it has the capacity to spend. In 2006, for example, the Oil Ministry spent just 3 per cent of the $3.5 billion it was allocated for oil reconstruction projects.
The tragedy is that the recovery has taken so long. At the time of the US invasion, Vice-President Dick Cheney and other senior US officials boldly predicted that production would exceed three million barrels a day within eight months, generating more than enough money to rebuild Iraq.
The Bush Administration also failed to foresee the virulence of the insurgency. The website Iraq Pipeline Watch records 466 attacks on oil infrastructure or employees since 2003, and that is probably a fraction of the real total. US officials reckon as many as half the industry’s most skilled workers fled Iraq, or were killed, as Iraq descended into mayhem. The insurgents have used the oil that was supposed to finance the country’s reconstruction to fund their efforts to destroy it.
Stats from the London Times on Iraq's oil :
113bn Barrels of proven oil reserves in Iraq, the third highest after Saudi Arabia and Iran. Experts say the real figure may be nearly double that as so little of the country has been properly explored
2.4m Barrels of oil a day now being produced, below the record of 3.5 million in 1979, the year before the Iran-Iraq war began, but nearly back to the 2.6 million before the US invasion of 2003
$39bn Amount earned by Iraq’s oil exports last year, up 31 per cent. The daily average exported was 1.6 million barrels, up 9 per cent
90% Oil accounts for 90 per cent of the country’s revenues
60% Despite its sea of oil, Iraq imports nearly 60 per cent of its petrol and other oil products because its refineries cannot produce enough
