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Potential buyers can’t get at Iraqi crude oil First week of April: oil still pumping, but no officials to sign for sales Bruce Stanley Associated Press Business Writer
Despite U.S. air attacks around prized oil fields in northern Iraq, crude from the area still flows by pipeline into Turkey.
The oil could pay for millions of dollars in emergency food and medicine for Iraq, but industry sources and U.N. officials said the first week of April that it's sitting in storage because potential buyers can't contact the Iraqi-run company that owns it.
After two weeks of fighting, American and British forces say they have secured key oil facilities in southern Iraq, including 600 of the 1,000 southern oil wells and a crucial export terminal in the Persian Gulf.
However, Iraq still controls more than 600 wells in the north, and U.N. officials say the Iraqis are pumping crude to Ceyhan, Turkey, from fields near Kirkuk.
The Kirkuk-to-Ceyhan pipeline is Iraq's only remaining oil export outlet. The other, the Gulf port of Mina el-Bakr, is under allied control.
U.S. warplanes have intensified their bombardment of Iraqi positions near Kirkuk, a strategic city held by the Iraqis but coveted by independence-minded Kurds. Kurdish forces advanced closer to Kirkuk April 3. sEven so, the Iraqis managed April 2 to pump 116,000 barrels through the Kirkuk pipeline and into storage tanks in Ceyhan, according to officials with the U.N. oil-for-food program, which lets Iraq export crude and use the money to buy humanitarian goods.
"I am surprised, to be honest," said Leo Drollas, chief economist of the Center for Global Energy Studies in London. Kirkuk size of Prudhoe The Kirkuk field is the biggest in northern Iraq, containing an estimated 7 billion barrels of recoverable crude. That puts it in the same league as Prudhoe Bay, Alaska, during its heyday in the 1970s, Drollas said. Before the war, its production ranged from 500,000 to 900,000 barrels a day.
Drollas suggested that production at Kirkuk might actually have stopped and that the oil emerging at Ceyhan could be residual crude pushed out of the pipeline by the system's pumps and compressors.
However, U.N. oil-for-food officials maintained that the Iraqis were still pumping fresh crude into the pipeline.
"I don't know who's still working those fields. It doesn't sound like the healthiest of work environments. There's fighting going on right over Kirkuk," said Jan Stuart, head of research for global energy futures at ABN Amro in New York.
The Iraqis will probably have to stop pumping within a few days. No tankers have loaded Iraqi oil at Ceyhan since March 20. The storage tanks, which already contain 8.6 million barrels of Iraqi crude, have room for just 400,000 more, U.N. officials said. If Iraq keeps producing even after these tanks are full, crude will eventually back up inside the pipeline and come out at its source. Lack of paperwork Some insurers and banks are still willing in principle to finance shipments of U.N.-approved crude from Ceyhan.
"There's no reason why they wouldn't, so long as it's certified as not falling under sanctions," said Neil Smith of the Lloyd's Market Association, a trade association of underwriters.
The problem is that would-be buyers of Iraq's oil can't complete the paperwork to take possession of the crude because they can't contact officials of the country's State Oil Marketing Organization in Baghdad. The war has disrupted Iraqi communications, and calls to SOMO's headquarters in Baghdad have failed or gone unanswered for several days.
On the eve of the war, the United Nations had approved 141 sales contracts for 380 million barrels of Iraqi oil. But without legal title to the oil, shippers can't load any of it.
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