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Bush wants more cash for Iraqi oil

The Bush administration is calling for an additional US$2.1 billion to repair the Iraqi oil industry, a sharp increase from previous estimates that underscores how the sabotage of pipelines and the electricity grid has throttled the flow of oil for export and into domestic refineries.

As late as last month, the US-led civil authorities in Baghdad and the Iraqi oil ministry said that about US$1.1 billion would be needed to make crucial fixes to the oil industry by next March. A spokesman for the White House's Office of Management and Budget, Trent Duffy, said that the request for an additional US$2.1 billion came from the office of Paul Bremer, the head of the civil administration in Iraq. The sum is part of a supplemental US$87 billion budget the Bush administration is preparing to seek from Congress to support American troops in Iraq and to finance the country's reconstruction.

In a letter sent on Friday to the Office of Management and Budget, two Democratic congressmen, Henry Waxman of California and John Dingell of Michigan, called the request "a radical departure from the administration's prior estimates of the costs of oil field reconstruction. Moreover, it was apparently developed without consultation with the Army Corps of Engineers, the agency overseeing the oil field reconstruction."

A spokesman for the Corps of Engineers said that it had not been contacted by the administration to develop the new estimate, but it remains unclear whether Bremer's administration spoke to the Corps of Engineers staff in Iraq. The congressmen have asked the budget office for a detailed explanation of how the estimate was derived and a list of the projects involved.

Duffy said that the administration had not yet formally asked Congress for the US$87 billion, and when it does some time in the next few weeks, it will provide the explanations sought by the congressmen.

The request for the additional money has highlighted how hard it has been for the occupying powers to halt the sabotage that chips away at the oil sector and limits its output.

During the war, the administration, its British allies and many oil traders were convinced that Iraqi oil production would quickly resume and jump back to prewar levels.

Instead, saboteurs have repeatedly blown up crucial pipelines that export oil from the Kirkuk fields in the north to the Turkish Mediterranean port of Ceyhan, choking off the second of Iraq's two export routes. And repeated sabotage of the electricity grid periodically brings oil facilities to a grinding halt.

As a result, Iraq exported only about 800,000 barrels a day in August, less than half of the approximately 2 million barrels a day it exported before the war. Moreover, the Iraqi oil industry often cannot produce enough for the domestic market because of sabotage.

When refineries, in particular, are shut down by power failures, it takes them about a week to come back on line, which limits the production of gasoline, cooking gas and other fuels.

Of the US$2.1 billion the administration plans to request, a little more than half would go to "repairs and security because of increased sabotage," Duffy said. A little less than half would go to buying "petroleum products to ensure some reserve margin, so that the Iraqi people have a safe supply of oil if future disruptions of service occur," he said.

Iraq, which has the third-largest oil reserves in the world, after Saudi Arabia and Canada, has been importing petroleum products since late May.

The Corps of Engineers has also spent more on oil reconstruction than it originally envisioned, largely because of the sabotage, said Scott Saunders, a spokesman. In early summer, the Corps of Engineers had estimated that it would need to spend about US$650 million on repairs to the Iraqi oil industry.

But as of early September, it had already spent US$948 million as part of a continuing contract with Halliburton. Aspects of this increase were reported on Friday by The Wall Street Journal.
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