Sabotage still clogs Iraq's oil

Iraq exported $24 million worth of crude oil a day in October, but many pipes ring hollow.

Mannaa al-Ubaidi's explanation of the obstacles to resuming exports from Iraq's Northern Oil Company is interrupted by a knock at the door.

An American soldier pokes his head into the executive's freshly painted office, which was badly damaged by postwar looting. "Excuse me, sir, I've come for the production reports. No bad news, I hope?"

Mr. Ubaidi, a 33-year veteran of Northern Oil and its current chief executive, assures the soldier all is well, hands over a summary of crude-oil output from the rich Kirkuk fields, and ushers him out. He says he knows full well why the US is anxious to track his progress.

"The work we do here is vital to the future of Iraq,'' says Ubaidi. "We help fuel the domestic economy, and oil exports are going to determine how much we can spend on our own reconstruction."

How much, remains Iraq's $50 billion question. That's the amount the US-led coalition predicts oil exports will contribute to Iraq's government in the next three years.

The good news is that the oil is flowing again. Oil-well fires have been extinguished, looted spare parts replaced, and some pipelines reopened. In October, Iraq exported a daily average of 1.14 million barrels of crude, worth about $24 million. It's a promising amount when compared with the coalition's goal for the end of 2004, 1.6 million barrels per day (b.p.d.). But it falls far short of the goal of 2.4 million b.p.d. by the end of 2005.

But just 10 miles from Ubaidi's office in the center of Kirkuk city is the bad news.

All looks well at the sprawling depot that marks the start of the 300-mile pipeline to Turkey's Mediterranean port of Ceyhan. Huge cylindrical oil tanks squat on the landscape, and the four-foot wide pipeline gleams.

But it's strangely silent. Slap the pipeline hard with your palm and you're rewarded with a hollow, resonant thunk. That's evidence that the pipeline which accounted for about 40 percent of Iraq's exports of 2 million barrels a day before the war remains dry.

The reason isn't technical. Like almost everything else in Iraq these days, the problem is security, particularly in light of soaring attacks across the country that have shown growing sophistication and coordination among the insurgents.

Iraq's pipelines have been repeatedly targeted by saboteurs. The export pipeline from Kirkuk has been an easy target since it snakes southwest through Bayji in the "Sunni Triangle" where resistance to the US coalition is strongest, before turning north towards Turkey.

The problem isn't just exports - which coalition officials and Iraqi oil executives say they are getting under control. Thousands of Iraqis have been recruited into the Facilities Protection Force, a sort of infrastructure police, and are being put to work guarding the pipeline.

But there have been growing signs that enemies of the coalition have been shifting their attention to the domestic pipelines, as important in their own way to Iraqi stability as oil exports. Guarding the domestic pipelines is a task that makes protecting the 300-mile pipeline from Kirkuk look like child's play.

"We are facing sabotage always,'' says Salah Aziz Karim, who oversees the domestic distribution network. "It's not dramatic - last week two attacks, the week before that just one - there's no steady pattern. But it has yet to stop."

The domestic network is Iraq's central nervous system. A twisted spine of pipes runs through the dense center of the country from Mosul in the north to Basra in the far south. From it extend spidery veins carrying crude to the nation's three main oil refineries, gas-oil to the power plants, and and subsidized cooking gas to rural depots. The total length is about 4,000 miles.

Under Saddam Hussein, cheap energy thrummed through these pipes with metronymic regularity and became a birthright of all Iraqis. All petroleum products here cost a fraction of their market value. A gallon of gasoline is about 10 cents - cheaper than bottled water.

This expectation of cheap gas has forced the coalition to import gasoline and other products and sell them at big losses to avoid unrest. House Democrats complained earlier this week that Halliburton Inc., which has the major oil-reconstruction contract here, was charging the US $2.65 cents a gallon for gas being sold in Iraq for a fraction of its cost.

Even so, shortages of crucial oil products remain, driving up Iraqi frustration and anger at the coalition. Zaidi Hani, a housewife in a black shawl, complains that the price of the liquefied petroleum gas (LPG) she relies on for cooking, particularly for the hobutz flat-bread that all Iraqi families bake, has doubled since the war - when she can get it.

"It's very expensive but I don't have much choice. I have to cook for my family," she says.

At oil facilities across the country, from the venerable Kirkuk, established by the British in 1927, to the Al Daura refinery in Baghdad, engineers and executives say production capacity is up as a result of a crash program spearheaded by the Army Corps of Engineers. Salaries are being paid again and repairs continue. But actual production continues to languish because sufficient crude isn't flowing through the pipelines.

"Our principal bottleneck is security,'' says Northern Oil's Ubaidi. "Steps have been taken to secure all of our facilities, but there is still this feeling that there might be risks."

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