I R A Q : Oil flow likely to be months away

Financial Review network Apr 8 Chip Cummins, The Wall Street Journal

US army engineers, offering the most authoritative assessment yet of Iraq's huge southern oilfields, said a resumption of petroleum exports is months away, further damping hopes of a quick return of Iraqi crude to world markets.

According to Brigadier-General Robert Crear, commander of the South-Western Division of the Army Corps of Engineers, a lack of replacement parts for infrastructure in the fields might also crimp initial output once production resumes.

The US effort has been further hampered by the 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, he said. "It'll be months, but I can't tell you how many."

Last week, a British commander in charge of UK forces in the region estimated it would take about three months and $US1 billion ($1.6 billion) to restart exports from Iraq's massive southern fields, now largely held by US and British forces.

That estimate surprised some oil-industry analysts who had been expecting exports to resume within weeks, since damage to the fields appears minimal.

Meanwhile, the US is moving to recruit senior executives to help run Iraq's oil industry after the war. Phillip Carroll, the former chief executive of Shell Oil, the US operation of Royal Dutch/Shell Group, would lead Iraq's national oil company, sources said.

It is not clear whether Mr Carroll, who retired last year as CEO of Fluor, 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 to oversee Iraq's State Oil Marketing Organisation, 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. Mr Chase, due to retire from BP this month, could not be reached for comment. A BP spokesman 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 bode well for the resurrection of the Iraqi oil industry, which was nationalised in the 1970s and has been badly hit by war and sanctions.

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.

Retreating Iraqi soldiers appear to have torched just nine wells in the oil-rich south. All but two of the Iraqi fires have been extinguished.