EA report outlines issues with Iraqi energy security, fragile systems

While Iraq’s oil industry will continue to face problems with security in 2009, the country’s crumbling production and pipeline systems are more likely to disrupt crude exports, according to a report by London-based Exclusive Analysis (EA).

“Notwithstanding an overall improvement in security, the situation in the country is still extremely fragile, and progress over the next 12 months is at significant risk of being reversed by a variety of factors,” the report said.

In general, progress is at risk from “residual sectarianism, fueled by unresolved issues like the status of Kirkuk, by rogue Shia militants’ violent opposition to the continuing Coalition presence, and by the potential fragmentation of Prime Minister’s Al-Maliki’s United Iraqi Alliance.”

Security risks in Basra province and to the offshore oil platforms are being reduced, the analyst said.

However, it noted that the building of Iraqi Navy capability has encountered delays, including slippage in the delivery dates of Malaysian and Italian patrol vessels.

Protecting ports

At the start of 2008, some of Iraq’s ports had been infiltrated by rival militias vying for control of Basra province and oil smuggling operations.

Fighting between the groups led to routine blockages of access to oil fields and ports.

Crucially, the perimeter of Umm Qasr, Iraq’s only bluewater port and the entry point for 80% of its imports, was secured when Iraqi government military forces removed the Mehdi Army militiamen who had assumed control.

Key port administrators were dismissed, and Iraqi marines were deployed as part of the security crackdown. The capability of the Iraq Navy, which operates from Umm Qasr port, was bolstered by the delivery of US patrol boats.

However, a projected increase in the capabilities of the Iraqi Navy, including the delivery of new patrol vessels from Italy and Malaysia, has been delayed, in part due to arguments over the cost of the vessels and mechanics of transferring money, which is likely to extend into 2009. The new vessels will enable the Iraqi Navy to carry out more patrols, which have already increased by almost 100% since the start of the year.

Protecting terminals

In April, the Iraqi Navy assumed responsibility for protection of the Khawr al-Amaya oil terminal (KAOT) and the al-Zubayr port. Currently one Iraqi Navy marine battalion defends the two oil terminals.

“However it is the al-Basrah oil terminal (ABOT) that is most vulnerable, given that it is the only functioning oil platform,” EA said, noting that the terminal is still at risk to attacks by small boats operated by insurgents or Iranian Revolutionary Guards, despite the Coalition naval presence.

Although security issues remain a concern, they are being replaced by infrastructural limitations as the primary risks facing Iraq’s six commercial and oil transit ports on the Persian Gulf, EA said.

Underinvestment issues

“As security risks decline, it is clear that the years of underinvestment in infrastructure and a severe lack of modern equipment, such as container cranes, are undermining the stability of supply chains,” it said.

While the Iraqi Navy will take over responsibility for guarding the two offshore oil terminals at Basrah and Khor al-Amaya, repair and upgrade work is essential to expand (or even maintain) export capacity, particularly with respect of the terminals’ connection to the mainland ports.

In October, a study commissioned by the US Congress warned that the two 50-km subsea oil pipelines that transport the crude to the terminals were at imminent risk of failing due to “severe corrosion and vulnerability to rupture, thus reducing their ability to withstand attempted interdiction or sabotage.”

Failure would cause a lengthy suspension in over 1.5 million b/d of exports, EA said, noting that it was also reported in October that Basra port loading rates declined to 1.32 million b/d, due to a power generation failure.

“Addressing these issues will require significant investments in dredging, port construction, and offshore terminal works, as well as several years to implement projects,” EA said.

Meanwhile, Iraq’s exports risk suffering severe bottlenecks.

Still, British military sources in Iraq are nevertheless optimistic and confirmed that port facilities are improving and that navigational access is getting better.