US wants execs for Iraq's oil

News24.com 03/04/2003 14:07  - (SA)   Chip Cummins

Iraq - The US is moving to recruit senior executives to help run Iraq's oil industry after the war, even as US military engineers are reckoning that a resumption of petroleum exports is still months away.

The general commanding the US Army Corps of Engineers also said that a lack of replacement parts for infrastructure in the fields may crimp initial output volumes once production resumes.

The US effort has been further hampered by an unwillingness of Iraqi oil workers and managers to return to the job amid continued fighting in the south.

"We don't know how much it's going to cost and how long it's going to take" to bring exports from southern Iraq back on line, said Brigadier General Robert Crear, commander of the Southwestern Division of the Army Corps of Engineers, which has been tasked with Iraqi oil-rehabilitation efforts.

"It'll be months, but I can't tell you how many," he said.

The resumption of Iraqi exports is crucial for global oil markets, which have tightened in recent months. A strike in Venezuela hobbled exports from that big oil producer for months, while a colder-than-normal winter across the northern hemisphere helped erode stocks of inventory in big consumer countries, particularly the US.

More recently, political violence in Nigeria has sent major oil companies fleeing the region and shutting down oil production there.

Meanwhile, Phillip J Carroll, the former chief executive of Shell Oil, the US operations of the Royal Dutch/Shell Group, will lead Iraq's national oil company, said people familiar with the appointment.

It is unclear whether Carroll, who retired last year as CEO of Fluor Corporation, would formally head the Iraqi company or exercise control by heading an advisory body in charge of Iraqi petroleum in a postwar transition period.

One industry official said the US was also considering an Iraqi-American, whom he couldn't identify, to oversee Iraq's State Oil Marketing Organisation (Somo), which is in charge of exports.

The official also said Rodney Chase, deputy CEO of BP PLC, was being considered as a deputy to whoever runs Somo. Chase, due to retire from BP later this month, couldn't be reached for comment.

A BP spokesperson declined to comment.

While the overall US plan for running Iraq's oil industry isn't known yet, it is becoming clear that Washington is seeking to recruit top executives from the largest global oil companies on both sides of the Atlantic.

Their expertise could assist in the resurrection of the Iraqi oil industry, which was nationalised in the 1970s and has suffered amid war and sanctions for more than 20 years.

Oil prices, which soared ahead of the Iraq invasion on worry over export disruptions in the Persian Gulf, have fallen considerably after it became clear that supply routes out of the Gulf and Iraqi oil infrastructure remained relatively unscathed by war.

Wells set on fire

Retreating Iraqi soldiers appear to have torched just nine wells in the oil-rich south, a far cry from fears of a repetition of what happened in Kuwait in 1991, when Iraqi troops set more than 700 wells ablaze. All but two of the Iraqi fires have been extinguished.

In late trading on the New York Mercantile Exchange, the benchmark US futures contract was down $1.33 to $28.45.

Last week, a British commander in charge of UK forces in the region estimated it would take about three months and $1bn to restart exports from Iraq's massive southern fields, now largely held by US and British forces.

That estimate, by Air Marshal Brian Burridge, commander of British forces in the theatre, surprised some oil-industry analysts who had been expecting exports to resume in weeks, since damage to the fields appeared minimal.

Crear - whose engineers are in their second week of probing the fields - said on Wednesday that he didn't know what the British estimate was based on, and said he won't have a firm timeline of his own until initial assessments of the fields are complete.

But he suggested it was possible repairs might take even longer than three months. "I would hope that it's three months, instead of six months," he said.

The Army Corps of Engineers is working with Kellogg Brown & Root, a subsidiary of Halliburton Company, to assess the fields and return them to "prehostility" production levels.

Before the war, Iraq was exporting some two million barrels of oil per day. Iraq's southern fields contribute about 60% of the country's output, with most of the remainder coming from Iraq's northern fields around the city of Kirkuk, still under Baghdad control.

Army officials said they have so far inspected more than 200 wellheads, out of an estimated 800 wellheads in the south. Military ordnance experts are combing each wellhead for signs of sabotage or booby traps, which they say they have found at some wells.

The general condition of wellheads - typically a tree-shaped collection of piping and valves jutting up from the ground - has been good, according to officials.

"Over all, they're in good shape," said John Forslund, the Army Corps of Engineers' project manager for the south.

"That's a pleasant surprise."

That isn't the case with some of the gas-oil separation plants, pumping stations and other critical infrastructure that dot the fields.

Crear said that many of the parts in the plants and in other equipment in the field are mismatched, perhaps the result of cannibalisation by Iraqi engineers looking to keep the fields running.

He said that many replacement parts ? from dozens of different manufacturers - may take a long time to order, and the delays could affect the amount of oil the fields can pump initially.

"Our ability to get in there and get parts, it might be challenging," he said.

At Gas Oil Separation Plant #6 - a collection of pipes, pumps and manifolds enclosed in a sand wall - hand wheels are encrusted with dust, pressure gauges are broken or missing and heavy corrosion cakes fittings. Dried oil stains piping around seals, suggesting widespread leaking when the plant was operational.

Army officials here said maintenance and operational procedures appear to have been poor. But Iraqi workers haven't been showing up in sufficient numbers to provide hands-on guidance to the Americans.

The Pentagon was counting on meeting managers and field hands to keep Iraqi oil flowing. Continued fighting in large population centres, including the nearby town of Az Zubayr and the main southern city of Basra, has complicated that effort.

Military officials have said in recent days that some Iraqis have been showing up eager to get back to work in the fields, but Crear and other officials here said the process is moving slowly.

US and British civil-affairs specialists are making contact with some Iraqis, but "people are very reluctant to expose themselves", said Crear.