CGES: Iraq's oil production recovery will be slow going
Restoring Iraqi oil production to prewar levels will be a slow and painful process in the face of widespread looting, sabotage, and armed attacks on US and allied forces.
Julian Lee, of the Centre for Global Energy Studies, London, Mar. 29 presented a pessimistic outlook on Iraq's oil recovery to a Canadian Energy Research Institute conference near Calgary.
Factors leading to unrest include the fact that after the defeat of the Saddam regime, 52 million pieces of Iraqi military equipment were looted and fell into the hands of people who "do not bode Iraq well," Lee said.
Dismissal of the Iraqi army and Baath Party members has left as many as 500,000 people with no stake in the future of Iraq. This figure rises to more than 2.25 million people, if dependents are included.
Lee said Iraq's borders have proven to be porous and have allowed contraband materials to flow freely.
The analyst said there has been "immense" looting of basic infrastructure, including oil industry equipment. That has included heavy equipment, drilling rigs, heavy trucks, and even a 150 ton crane.
Lee says many items were sold on the black market or crossed borders. The speaker said the US Army Corps of Engineers identified 220 projects with a total cost of $1.1 billion needed to restore Iraq oil production to prewar levels.
But as of this month, only 10% of those projects have been completed.
Lee said attacks on oil fields in northern Iraq have been a major problem, and fields in the south might be producing beyond their optimum level to meet current production of about 2 million b/d of oil.
On the political front, Lee noted the governing council appointed by the occupying forces has struggled to gain authority and legitimacy with the Iraqis.
He said attacks by opponents are being increased to make Iraq ungovernable. Lee said one of the problems is that some governing council members are former Iraqi exiles with no constituency.
Lee also said an Iraqi production target of 2.8 million b/d is unlikely in the near future, and the road ahead will be slow.
The speaker said there will likely be formation of a national oil company and a debate on the role of foreign oil companies and contractors. He said security also would be a major issue.
Lee concluded that, it is unlikely there will be foreign investment in Iraq until near the end of this decade, and it will be a long, slow process to industry recovery.
