Getting Iraqi oil back on market a matter of months or years

by The Associated Press

Once the war in Iraq ends, it's likely to take months before the country's oil again flows into world markets, analysts say. Getting wells, pipelines and pumping stations back into operation is a priority for U.S. planners who see oil, and the income it produces, as essential to rebuilding postwar Iraq. By all accounts it will be several years before the country's dilapidated oil industry can boost production significantly.

U.S. and British troops moved swiftly once the war began to control key parts of Iraq's southern oil fields. Just as importantly, they secured crucial oil-gathering points and the major export terminals on the Persian Gulf and counted only nine wells on fire.

Iraq's northern fields also appeared to have avoided damage thus far.

U.S. war planners had worried that President Saddam Hussein would set Iraq’s wells ablaze as he did Kuwait's wells toward the end of the Gulf War.

Adm. Michael Boyce, chief of the British defense staff, said “practically all” Iraqi oil and gas installations had been mined or booby-trapped, indicating Saddam was “prepared to blow up his entire economy.”

But “on the whole, the oil infrastructure appears pretty much intact,” said Maj. Charlie Eastwood of the British 7th Armored Brigade at an oil field near Basra.

Still, getting Iraq's oil to flow into world markets again will take time, said Robert Ebel, director of the energy programs at the Center for Strategic and International Studies in Washington.

Until recently, Iraq had produced about 2.5 million barrels of crude a day, exporting 2 million barrels. The exports stopped when it became clear war was imminent.

The world's oil markets have hardly noticed. Oil prices have dropped from nearly $40 a barrel in mid-February for future delivery to $27 March 21 for oil to be delivered in May.

The reason: There is plenty of oil.

For weeks, Saudi Arabia has pumped as much as 9.5 million barrels a day — 1.5 million barrels above its quota set by the Organization of Petroleum Exporting Countries. Also, Saudi Arabia is said to have 50 million barrels in storage and in tankers already on the high seas. Other OPEC members have stepped up production as well.

U.S. planners already are mapping strategy to get Iraq's oil flowing again. The Pentagon has contacted a number of major oil industry service companies — among them Halliburton Co., once run by Vice President Dick Cheney — to repair any of Iraq's wells that are damaged and assess other facilities.

One problem is that so little is known about the condition of Iraq's oil infrastructure.

The last time an outsider produced an assessment was three years ago. It found “dilapidated” conditions because of poor maintenance, neglect and pressure on oil managers to keep production as high as possible, oil experts said.