Iraq Exports First Crude Oil Since War

Iraq returned to the world oil market Sunday, exporting its first crude oil since the U.S.-led invasion, a step crucial for paying for the country’s reconstruction.

Meanwhile, a fuel pipeline west of Baghdad exploded and caught fire, the U.S. military said, and flames were seen Sunday reaching high into the sky. The pipeline was in a different part of the country and was not expected to affect the Kirkuk-Ceyhan operations.

The cause of Saturday’s explosion near the town of Hit, about 95 miles west of Baghdad, was being investigated, U.S. Military spokeswoman 1st Lt. Mary Pervez said. There were no U.S. casualties, she said.

No other details were immediately available.

Also in Hit, two U.S. soldiers were injured when their Humvee hit a “landmine or other explosive device” on Saturday, said Maj. Sean Gibson, a U.S. military spokesman. He said the injuries were not considered serious and that the soldiers were being treated at a combat support hospital.

At Ceyhan Oil Terminal, Turkish workers began loading 1 million barrels of Iraqi crude onto the Turkish tanker Ottoman Dignity in a ceremony attended by senior Iraqi, U.S. and Turkish oil officials at this Mediterranean oil terminal, at the end of a twin pipeline running from Iraq’s northern oil fields.

The Ottoman Dignity will carry the oil to a Turkish refinery on the Aegean coast.

“This will mark the beginning of a new era and beginning of normalization,” Mehmet Takiyuddin Bilgic, head of Turkey’s pipeline company BOTAS, told The Associated Press.

Money from Iraq’s oil sales will go into a U.S.-controlled fund dedicated for reconstruction. Iraq, which has the second largest oil reserves in the world, is in desperate need of funding to repair battered infrastructure – including its oil facilities – and rebuild an economy devastated by more than 12 years of U.N. economic sanctions.

The oil loaded onto the tanker came from some 8 million barrels that have been stored in southern Turkey since before the U.S.-led war began. Iraq could begin pumping fresh oil to Turkey as early as Sunday, officials said. But other Iraqi oil officials in Kirkuk, 150 miles north of Baghdad, said Sunday that the Kirkuk-Ceyhan pipeline is still not ready to begin carrying crude.

Bilgic said he expected Iraq to resume pumping when oil tanks are emptied at Ceyhan at the end of the month.

Iraq is expected to start shipping oil from its other major outlet, the terminal of Mina al-Bakr on the Persian Gulf, on June 28.

The pumping “marks the return of Iraq – on a limited basis – to its traditional role as an oil exporter,” said oil industry expert Gerald Butt of the Middle East Economic Survey, or MEES. The Cyprus-based MEES is a weekly trade journal which closely follows the oil industry.

Iraq is now producing 750,000 barrels a day and Iraqi officials have said they hope to export 1 million barrels a day by the end of June and 2 million barrels a day by the end of the year. Some analysts, however, regard those estimates as too optimistic.

Iraq’s acting oil minister, Thamer al-Ghadhban, said a priority for the coming year is “to restore the facilities of the Iraqi oil industry.” He said the industry would progressively be raising more money and would be contributing to Iraq’s recovery by the end of 2004.

For years, Iraq’s oil industry has languished due to U.N. sanctions, which barred trade except the sale of oil to fund the purchase of food and other humanitarian aid. Much of Iraq’s oil equipment is old due to the trade sanctions and many oil facilities were looted after the war.

The United Nations voted last month to end the sanctions. In the weeks after the war, Iraq’s oil industry was in such poor shape that the country was forced to import gasoline for local consumption.

Iraq last exported oil from Ceyhan on March 20, as part of the tightly-controled U.N. sanctions program.

Before the war began in March, Iraq pumped around 2.1 million barrels a day. “It could be a year or more before Iraq returns to its pre-war production/export levels,” Butt said.

Until Iraq significantly boosts its oil production, it is unlikely to have an impact on world oil prices.