Iraqi oil exports from south fields expected by June --British officer makes prediction

<a href=www.sfgate.com>Verne Kopytoff, Chronicle Staff Writer Saturday, March 29, 2003

Exports of crude oil from Iraq's southern oil fields are expected to begin by June after crews remove booby traps, extinguish well fires and fix outdated equipment, according to a British commander.

The remarks by Air Marshal Brian Burridge, who leads British forces in Iraq, are the most detailed yet about restarting Iraq's oil industry under a U. S.-led coalition.

He said that getting the fields to produce at full capacity of 1.8 million barrels a day will cost $1 billion in equipment upgrades. He did not elaborate on where those funds would come from.

Since the Persian Gulf War ended in 1991, Iraq's oil infrastructure has been only marginally maintained and needs extensive repairs.

"These oil fields are critical to the future reconstruction and prosperity of Iraq," Burridge said Thursday in a statement from U.S. Central Command headquarters in Qatar.

Plans call for using money generated by Iraq's vast oil reserves to rebuild the country after the war and feed its people. Burridge said that future crude exports will be made under the U.N. oil-for-food program.

Under the program, the United Nations oversees Iraqi oil sales and holds the proceeds in an escrow account to buy products such as food and medicine. The system, implemented in 1996, ground to a halt just before the current war began.

On Friday, the U.N. Security Council voted to allow Kofi Annan, the organization's secretary-general, to manage the humanitarian portion of the oil-for-food program for the next 45 days. Details about oil sales, however, have yet to be worked out.

The debate over selling Iraqi oil promises to be divisive between supporters and opponents of the war in the United Nations. Bitter disputes will almost certainly arise over who represents Iraq's oil industry if Saddam Hussein is still in power, possibly causing delays in getting exports to the world market, analysts said.

Iraq's northern fields remain intact and continue feeding a pipeline to Ceyhan, Turkey, on the Mediterranean coast. However, no tankers have picked up oil there for more than a week. The northern fields remain under the control of Hussein's forces.

According to Burridge, British forces have secured southern Iraq's principal oil field, Rumailah, and are sweeping the area of munitions and booby traps. He said that three well fires have been extinguished by firefighters, leaving six others still burning.

Under the past U.N. program, oil from the southern fields was loaded on tankers from Mina al-Bakr, a rig in the Persian Gulf. On-land security is, therefore, less of an issue.

However, minesweepers must clear the waterways for tankers, and forces must ensure that ships aren't attacked by missile or from boats. It's unclear whether banks would offer oil companies lines of credit to operate in such conditions, analysts said.

Lt. Col Gene Pawlik, a spokesman for the U.S. Army Corps of Engineers, which oversees Iraqi oil field operations, was more circumspect than Burridge about the resumption of Iraqi oil exports. Pawlik said U.S. crews have inspected Iraq's southern oil fields but haven't done any detailed analysis of what needs to be done.

Security in the area remains tenuous, Pawlik said. He added that continued fighting in the area might delay the resumption of exports beyond three months.

"As far as our last report, we haven't been able to get in and examine the Iraqi infrastructure to know how long it would take to get the fields running again," Pawlik said. "If there is active combat going on, we may not be able to go in, no matter how long it takes."

Kevin Saville, managing editor for Platt's, an energy information service in New York, said: "I don't think anybody has an accurate grip on how long it's going to take. The way it's going now, it will probably be months rather than weeks."

The situation is clouded, Saville said, by the possibility that U.S. forces will still be laying siege to Baghdad for several months. Government officials haven't said whether they would still try to export Iraqi oil from the south with war still raging a couple of hundred miles north.

Lichtblau said the world can live without Iraqi oil. Saudi Arabia has said it will make up for the loss in Iraqi oil by producing more, although production disruptions due to unrest in Nigeria and Venezuela are causing oil prices to be higher than they would be under normal conditions.

"The idea that it may take three months isn't frightening," Lichtblau said. "If it's just a questions of Iraqi oil not being available, the market can deal with it."

E-mail Verne Kopytoff at vkopytoff@sfchronicle.com.