Bombing Disrupts Flow of Iraqi Oil

The bombing of a vital pipeline will stop the flow of Iraqi oil to Turkey for at least a week, officials here said Saturday as they condemned the latest act of sabotage to thwart Iraq’s efforts to get its petroleum industry back on track.

Saboteurs attacked the 600-mile pipeline near the north-central Iraqi town of Baiji on Friday, just two days after it had reopened. The conduit is one of the country’s two main export pipelines.

The sabotage casts doubts on the Oil Ministry’s goal of restoring production to 1.5 million barrels a day by fall, and to prewar levels of more than 2.5 million barrels by spring. Iraqi oil production went from zero right after the war to an average of 1.25 million barrels a day during the first week of August, an Iraqi Oil Ministry spokesman said last week.

U.S. officials and the newly installed Iraqi Governing Council are counting on Iraq’s oil reserves -- the world’s second-largest -- to fund their rebuilding programs, from hiring additional police officers to opening new schools.

Insurgents opposed to the occupation of Iraq have vowed to do all they can to block production and exports of oil. Although thousands of special Iraqi guards are being trained by the U.S. to protect the country’s pipelines, oil wells and refineries, they are not yet in place.

The explosion ripped through a 46-inch pipe, igniting a fire that was brought under control Saturday only when engineers shut off nearby valves. Flames and smoke from the fire ignited by the bombing could be seen 30 miles away.

On the first day of operation last week, more than 300,000 barrels of crude were shipped through the pipeline, which had been shut since April.

The reopening, originally scheduled for June, had been pushed back by several sabotage attacks, many of them in the Baiji area. Global oil prices soared after a July 31 attack and could well jump Monday when markets reopen.

“This is leading to a shortage of crude oil and a loss of production capacity that we are in dire need of,” Thamir Ghadhban, acting director of the Oil Ministry, said at a news conference in Baghdad on Saturday.

Even after the July attack, analysts had expressed optimism that Iraq could reach its production targets.

“For all the talk of the Iraqi oil industry being a mess, they are ratcheting up production little by little, steady by steady,” John Kingston, an analyst at the Platts market research firm in New York, said this month.

Optimism has been fed by a U.S. plan to invest $1.6 billion to restore an industry ravaged by looting, war and sanctions. Some analysts have even predicted that Iraq’s increasing oil production would disrupt the stability of the OPEC cartel and force oil prices down considerably dramatically by mid-2004.

“They are getting various problems worked out one by one,” said Michael C. Lynch, president of Strategic Energy & Economic Research of Amherst, Mass. “Iraqi production will keep the market nice and tame at a time when you will have growing seasonal demand.”

That optimism is based on the assumption that coalition and Iraqi security forces will gain control over insurgents and keep oil flowing through the country’s two main export pipelines: the northern extension from Kirkuk to the Turkish Mediterranean port of Ceyhan and the southern pipeline from the Basra oil fields to the Persian Gulf. The northern extension was bombed Friday.

U.S. officials have estimated Iraq oil revenue at just $3.5 billion this year, but increasing to $14 billion next year.

The dilapidated state of Iraq’s oil infrastructure has become increasingly apparent. U.S. Army chief engineer Bobby Nicholson told Associated Press that new problems limiting oil pressure tolerance were detected after the northern pipeline reopened Wednesday. The Army had already identified 47 projects in northern Iraq alone costing $295 million that must be completed to reach prewar production levels, he said.

Another source of worry is that in their haste to increase production, coalition and Iraqi Oil Ministry officials will use outdated techniques that will have the long-term effect of shortening the productive life of the oil fields, said Raad Alkadiri, a director at PFC Energy consulting firm in Washington.

Sabotage has also hit oil refineries, including a complex near Baiji. In the southern city of Basra, engineers are working to repair looting and sabotage damage at a major refinery, Ghadhban said.

The attacks have led to long lines and short tempers at gas stations in many parts of the country, including Basra, where frustrated residents took to the streets last week in two days of rioting.

“This damage is damage done to all Iraqis,” Ghadhban said. “The funds from the sale of oil go to the people of Iraq.”

Iraqi police officials said they had no information about who was responsible for Friday’s pipeline attack but blamed it on “hopeless conspirators” funded by loyalists to the old regime.

“No honorable Iraqi would do this,” said Ahmed Ibrahim, the newly appointed senior deputy in the Interior Ministry.

In addition to sabotage, the industry has been beset by smuggling. Theft of crude oil and refined fuels has been especially bad in the southern region where Saddam Hussein’s regime had authorized the hijacking of tanker trucks and pilfering of oil from pipelines to generate oil revenue above the limits imposed by the United Nations’ “oil-for-food” program.