U.N.: Iraqi oil production capacity falling

A report by United Nations inspectors has shown that Iraqi oil production capacity continues to decline, at a rate of 4-8%/year, with a significant number of wells shut in recently because of a lack of water removal facilities.

In a letter to the president of the U.N. Security Council, U.N. Sec. Gen. Kofi Annan said the experts estimated that about 20% of Iraq's wells shut in because of water production are irreparably damaged.

The remainder of the shut-in wells could be returned to production with imported spare parts, to recover production capacity of about 100,000 b/d. Spare parts could enable Iraq to boost oil production capacity over 6 months.

Rehabilitation program

On Dec. 28, said Annan, Iraqi oil authorities applied for spare parts and equipment worth a total of $240 million, of which applications amounting to $130 million were approved.

"It must be noted," wrote Annan, "that the entire program for the oil industry of Iraq is out of step with modern engineering techniques and generally accepted principles of 'value for money' investment. The list of spare parts reflects a proposed expenditure on valid items, but is related to a reliance on outdated oil field development concepts. It is extremely unlikely that the Iraqi oil industry will ever meet the planned production targets associated with the oil-for-food program within the current constraints."

Iraqi oil production is currently about 2.5 million b/d, of which 550,000 b/d is consumed locally, 70,000 b/d is exported by tanker truck to Jordan, and 1.88 million b/d is available for export.

Under the oil-for-food program that Baghdad reluctantly agreed to with the U.N., Iraq must sell up to $5.2 billion worth of oil every 6 months to fund the purchase of food and medical supplies for Iraq's citizens.

Basra refinery undamaged?

Meanwhile, Middle East Economic Survey reported that Iraq's Basra refinery went largely undamaged in raids by U.S. and U.K bombers on Iraq in December (OGJ, Dec. 28, 1998, p. 24).

MEES said the main plant at the refinery was untouched, although the distribution manifold outside the refinery was hit. The refinery had been processing 70,000 b/d of crude oil prior to the air strike, roughly half its full capacity.

Since then, U.S. and U.K. airplanes have several times fired missiles at Iraqi radar positions, after the ground installations locked onto the planes in the "no-fly zone" over Iraq.

U.S. Defense Sec. William Cohen said Iraqi President Saddam Hussein was becoming "frantic and agitated" while the French government unsuccessfully tried to persuade the U.S. and U.K. to adopt a new diplomatic approach to dealing with Iraq.