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Huge Hurdles Face Iraqi Oil Rebound Ex-Minister Says It Will Take Years to Return to Peak Output

Posted on: Thursday, 22 September 2005, 12:00 CDT

Big oil companies have no concrete plans to develop the Iraqi oil industry, meaning that it will be several years before the country has a hope of returning to its 1979 peak in production and probably a decade before Iraq could pump the 5.5 million to six million barrels a day suggested by its reserves, a former Iraqi oil minister said Wednesday.

The prospect of raising Iraqi oil production to improve the lives of its people was a central vision held out by the U.S. administration and other supporters of the invasion to topple Saddam Hussein in 2003.

But much equipment was looted from pipelines, pumping stations and other facilities in the immediate aftermath of the invasion and continuing extreme insecurity has kept even plucky foreign oil companies away. In addition, there has been a lack of clear institutions and laws to manage the oil industry.

Issam al-Chalabi, who was oil minister in Iraq in the late 1980s, before the 1991 Gulf war in which a U.S.-led coalition drove the Iraqis from Kuwait, told a conference here bluntly, "There is no plan to develop the Iraqi oil industry."

Taking a critical view of the new draft constitution, on which Iraqis are scheduled to vote Oct. 15, Chalabi highlighted what he said were contradictions between articles 109 and 112. Article 109 stipulates that hydrocarbons oil and gas are national Iraqi property. Article 112, however, lays down that in cases where matters do not clearly fall to federal authority, the laws of regions or provinces will take precedence.

This would leave the way clear for the authorities from, say, Shiite-dominated southern Iraq, to stake a claim to valuable national resources, he argued.

Looking at current production, he said that "Iraq will be lucky" to maintain its level of some 1.5 million barrels a day. In what he called the medium term, he doubted that Iraq could return to its 1979 record production levels of 3.5 million barrels a day until 2009.

As for long-term production, which would involve opening up new fields that could raise Iraqi production to 5.5 or even six million barrels a day, Chalabi said, "we can only pray." He said his guess was that it would be 2013 or 2014 before this was achieved.

Thamir Abbas Ghadbhan, a member of the Iraqi oil ministry and of the committee that worked on the draft constitution, presented a more optimistic view. "The most difficult days are over," he told hundreds of delegates at the conference, which was organized by Energy Intelligence and the International Herald Tribune. But even Ghadbhan conceded that there was a shortfall in, for example, gasoline needs, which he put at 24 million liters, or 6.3 million gallons, a day whereas production is 10 million liters a day.

This means Iraq has to import, he said, adding that $1.5 billion was spent on this in 2004, and upwards of $3 billion would be needed this year.

Oil revenue currently constitutes about 90 percent of Iraqi government revenue, he said. Given the dependence of ordinary Iraqis on food handouts and other state subsidies, he noted that increasing oil revenue was vital to the country's feeling of well-being.

Source: International Herald Tribune

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