Fri, Aug 15, 2003 page12

• Iraqi oil begins to flow using Turkish pipeline

  • AP
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  Despite sabotage, looting and other setbacks, Iraq began pumping crude oil from its northern oil fields on Wednesday to export facilities in Turkey for the first time since the war.

  Analysts said it was unclear how reliable the flow of oil from fields near the city of Kirkuk might prove to be, but the renewed use of the pipeline to Ceyhan, Turkey, marked a milestone in the restoration of Iraq's oil industry and augured well for thirsty world markets.

  Iraq began pumping oil from its northern oil fields at around 4:30pm, a Turkish oil official at the Ceyhan terminal said, speaking on condition of anonymity.

  Turkey's semiofficial Anatolia news agency quoted Energy Ministry officials as saying the first Iraqi oil reached the Mediterranean port at 9:30pm.

  "In a couple of weeks, you should be able to start inviting tankers to come on down," said Peter Gignoux, head of the petroleum desk at Salomon Smith Barney in London.

  Iraq sits atop the world's second-largest proven crude reserves, and oil exports are vital to its postwar reconstruction and the success of US efforts to implant democracy in the country.

  Before the war halted Iraq's oil production, the country pumped around 2.1 million barrels a day, most of it for export.

  However, it managed to export a paltry 300,000 barrels a day last month, said Michael Rothman, chief energy strategist at Merrill Lynch in New York.

  "The reality is that the export program has been stymied by unfortunate but continuing acts of sabotage. This is still the issue," Rothman said.

  Iraqi Oil Ministry officials could not immediately confirm that crude was flowing into the pipeline.

  Iraq began exporting from its giant southern oil fields last month, sending fresh crude to ships waiting offshore in the Gulf at the export terminal of Mina el-Bakr. These southern exports have been intermittent, due to power outages at the terminal and other interruptions.

  Although Iraq's big northern fields also resumed production after the US-British invasion, crude from the north was unavailable for export until now. Saboteurs and looters dogged efforts to rehabilitate the 950km pipeline from Kirkuk to Ceyhan. The lack of storage and export facilities forced the Iraqis to reinject much of the northern crude left over after refining for domestic use back into the natural underground reservoirs.

  "Our problem was not with the production of oil but with the security of the pipeline. It was really mainly sabotage. That is all. Otherwise we could have continued exporting crude oil in sizable quantities," said an official at Iraq's State Oil Marketing Organization, which controls Iraqi oil exports.

  The official spoke from Baghdad on condition of anonymity.

  Iraq was expected to pump between 300,000 and 400,000 barrels a day to Ceyhan. No oil tankers are currently booked to load there, and oil was expected to flow for about 10 days before any vessels would be sent for loading.

  "We have to wait for the storage tanks to be filled before exports can begin," the Turkish official said.

  Ceyhan already holds about 500,000 barrels of Iraqi crude in storage and has room for around 7.5 million more barrels. Turkish energy officials said Iraq previously stopped pumping crude to Ceyhan on March 23.

  The pipeline from Kirkuk is actually two parallel lines, one of which hasn't been used for years. The operable pipeline has a capacity of about 1 million barrels a day.

  "It had been unclear whether oil would be flowing through there at all. Without it, you were bottling up half of Iraq's export capacity," said Jan Stuart, head of energy research at FIMAT USA, the New York brokerage unit of Societe Generale.

  Delays in Iraqi exports have helped lift US oil prices to well above US$30 per barrel. Despite historically low inventories of crude in major importing countries, OPEC members agreed on July 31 to keep output steady -- a decision that provided no comfort to consumers.

  "At the end of the day, the oil coming out of Iraq is something the market needs right now," Rothman said.

  Iraq's oil exports resumed after the UN Security Council lifted sanctions on Iraq in May and recognized the US-led coalition's authority over the country and its oil revenue.
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