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Iraq: Ex-Minister Says US Mismanaging Iraqi Oil

by Barbara ShookOil Daily
February 16th, 2004

HOUSTON -- Former Iraqi oil minister Issam al-Chalabi charged Tuesday that the US-led occupation forces and the Coalition of Provisional Authority (CPA) -- aided by units of Houston-based energy services company Halliburton -- are continuing the mismanagement of Iraqi's oil fields that was begun under former leader Saddam Hussein to the detriment of the Iraqi people.

Speaking at the Cambridge Energy Research Associates' conference in Houston, al-Chalabi questioned whether the US-led coalition had formulated "a well defined oil policy" before the March 2003 invasion began. "The answer unfortunately is they have not had an oil policy," he declared.

Al-Chalabi noted that damage to oil-related facilities by Saddam's retreating forces and from collateral damage during the invasion was minimal. Nevertheless, oil production has yet to exceed 2 million barrels per day, compared to 2.8 million b/d in January 2003. Damage to the oil fields prior to the US-led invasion was well known by United Nations agencies and others, yet the US-led coalition had no plans to address the problem before entering the country and has yet to formulate any programs, he said.

Al-Chalabi noted that a year ago, he called for oil service companies to be prepared to move into Iraq at the earliest opportunity. So far, that opportunity has not occurred.

Halliburton refuted the allegations. "Halliburton's job is to assist the military in restoring the country's oil infrastructure, not a national energy policy," the company told Oil Daily. A Halliburton spokeswoman added, "Unlike a conspiracy theory, that's a theory in search of a conspiracy."

Al-Chalabi claims that the occupying forces protected the oil ministry building in Baghdad, but not the oil facilities in the field. Consequently, wide-scale looting destroyed much of the infrastructure, especially in the northern part of the country. "For some reason, looting was allowed to go unchecked," he stated. Guards that protected some facilities during the day were withdrawn at night, he said, leaving the quipment and machinery open to anyone. "Was there a reason for it? That is one of the questions yet to be answered," he said.

Al-Chalabi conceded that the damage began while Saddam still was in power
because of overproduction to boost revenues from higher oil sales. Sanctions imposed after the 1990-91 Gulf War exacerbated the situation due to lack of access to new equipment, technology and spare parts to keep the machines running. Other practices, including mismanagement of the production schemes and reinjection of various hydrocarbon products, further contributed to the situation.

Some of the damage can be corrected with proper reservoir management, al-Chalabi said, but some is irreparable. As a result, ultimate recovery from the fields would be less than otherwise possible, creating a permanent loss of resources for the Iraqi people.

The Kirkuk field, one of the world's largest oil deposits, has suffered significantly. Even if it were able to deliver at pre-war levels, the oil couldn't be exported because of the continued sabotage to the pipeline to Ceyhan, Turkey. According to al-Chalabi, the pipeline has been sabotaged more than 100 times since the fall of the Saddam regime in April 2003. "The question is: Why is this continuing today? Who is benefiting today?" he asked.

Al-Chalabi also questioned why Iraq has to import refined products from neighboring countries through Halliburton subsidiary Kellogg Brown and Root (KBR) when the country has more than 700,000 b/d of refining capacity, more than double Iraq's internal requirements. "Why? I am asking the question myself. When will this end?" he asked.

Al-Chalabi said the official response from authorities in Baghdad is that Iraq needs to build more refineries. Such work, however, is not part of the $1.4 billion in reconstruction projects sanctioned and funded so far, and most of that work, al-Chalabi added, went to KBR. But none of those projects deals directly with management of the oil fields, al-Chalabi maintained. No three-dimensional seismic work, downhole measurements of pressures and other conditions, or well workovers have been conducted. "To this very minute, Halliburton has not done any subsurface work. Why? It is not part of the CPA contract," he said.

Because of the state of the Iraqi oil infrastructure, particularly the reservoir conditions, al-Chalabi recommended that efforts to increase crude output beyond 2 million b/d be redirected to fixing existing problems.




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