Iraqi Oil Sabotage Concerns Loom in War

By BRUCE STANLEY The Associated Press Thursday, March 20, 2003; 5:37 AM

Saddam Hussein may have organized a meticulous plan for sabotaging Iraq's oil fields in a scorched-earth tactic designed to cripple Iraqi production.

The oil industry has buzzed with reports in recent weeks that Iraqis are rigging their wells with explosives, hoping to slow a U.S.-led attack and making the country's oil wealth worthless for any new government.

"We can confirm reports that (Saddam) has taken measures to booby trap oil wells by wiring the wells so that one person can blow them up," said Defense Department spokeswoman Megan Fox.

"If the worst happens and he does detonate something that causes the oil wells to catch fire, we'll do everything we can. Those assets belong to the Iraqi people, and as much as possible we'd like to keep them intact," she said.

In 1991, Iraqi troops needed just a few days and some plastic explosives to destroy more than 700 well heads and turn Kuwait's occupied oil fields into a desert inferno.

A loss of oil from Iraq - home to the world's second-largest oil reserves - could crimp supplies for importing countries, including the United States, which depends on Iraq for 2 percent of all the crude it consumes.

However, both Saudi Arabia and Venezuela have pledged to keep the oil flowing in wartime.

Oil exports are also a major source of the money that would be needed to pay for Iraq's reconstruction after a war. Because of their strategic importance, the Defense Department says it will try to secure Iraq's oil fields quickly to prevent Iraqi forces from damaging the country's 1,685 wells.

When Iraqi troops retreated from Kuwait in February 1991, they attached plastic explosives to well heads and piled sandbags against them to direct the force of the explosions for maximum effect.

The result was geysers of burning crude at 603 wells, serious damage at more than 100 others and widespread environmental degradation. Teams of firefighters from the United States, Canada and eight other countries worked from April until November to put out the fires.

Most of the teams used sea water pumped through Kuwait's empty oil pipelines to battle the fires. The heat was so intense, at more than 2,000 degrees Fahrenheit, that water sometimes continued boiling on the ground for two days afterward, said Mark Badick of Safety Boss, Inc.

"We've had fire helmets melt on our heads," said Badick, whose Calgary-based firm put out 180 of the Kuwaiti well fires.

Firefighters from Hungary had a different technique, using two jet engines mounted horizontally on a tank chassis - a homemade vehicle they called "Big Wind" - to blast flame-retardant foam at the fires.

It took Kuwait more than two years and $50 billion to restore its oil output to prewar levels. If Iraq sabotaged its oil fields, any cleanup could take far longer and cost much more.

Iraq's fields and pipelines are badly run-down after 12 years of U.N. economic sanctions. Its fields are also much farther from the sea than those in Kuwait, meaning a ready source of water might not be so easily available.

Destruction could be especially bad if Iraqis set off explosives underground, deep within the well shafts themselves. If that happened, firefighters would have to drill a new "relief well" and pump a mixture of sand, gel and mud into each damaged shaft to try to plug it up and stop the blowout.

"It's a long, arduous process," Badick said. Whereas he and his crews put out as many as five fires a day in Kuwait, cleaning up after a single underground explosion can take two months.

Even if the Iraqis did booby-trap their oil fields, Manouchehr Takin, an analyst at the Center for Global Energy Studies, said Saudi Arabia, Venezuela and other OPEC member countries could increase production to offset Iraq's 2 million barrels a day in exports.

Saudi Arabia, which has the world's largest crude reserves, repeatedly has suggested it would boost its output to keep supplies flowing. Also, the United States and other oil importing nations could tap their 4 billion barrels in strategic petroleum reserves, if necessary, to cover a shortfall.

Brown & Root Services of Houston has drawn up a plan for the Defense Department for containing and assessing any damage to Iraqi oil installations, but the Pentagon so far has awarded no contracts.

The challenge for such companies would multiply if Iraq used chemical, biological or radioactive material to sabotage its oil fields.

Special suits designed to protect a wearer against biological or chemical agents would disintegrate in the heat of a burning well. Firefighters might have no choice but to wait until the fires burn themselves out.

"That's a whole new ball game," said Peter Gignoux, head of the oil desk at Salomon Smith Barney.

Oil extends a week-long slump - Prices swing lower as dealers continue to predict an easy victory for the U.S. in the Iraq war.

March 20, 2003: 5:27 PM EST

NEW YORK (Reuters) - Oil prices Thursday afternoon lost gains notched earlier in the day, as the United States launched a widening offensive on Iraq and dealers predicted an easy victory for Washington.

Prices swung wildly during the day on reports, denied by Baghdad, that three or four oil wells were on fire in the south of the country.

OPEC exporters said they could fill any supply gap from the conflict in the oil-rich Gulf, and said markets already were well supplied. The West's energy watchdog, the International Energy Agency, said it saw no reason to release emergency stocks.

Shortly after 2:45 p.m. ET, light crude for May delivery settled $1.24 lower at $28.12 a barrel on the New York Mercantile Exchange, after rising as much as 76 cents on reports of oil well fires in Iraq.

Benchmark Brent crude oil fell $1.25 to $25.50 per barrel in London, having touched a three-month low of $25.30.

Oil has shed a quarter of its value in the last week on a massive bet by investment funds that war will end quickly, without causing major damage to oil installations.

"The war premium is diminishing on a growing certainty that coalition forces will prevail," said Peter Gignoux of Schroder Salomon Smith Barney.

Hours after U.S. cruise missiles hit targets in Baghdad, officials in neighboring Kuwait said oil output was normal, despite two Iraqi missiles hitting the north of the country.

Oil tanker traffic from the Gulf, which provides 40 percent of world oil exports, also was running smoothly, shippers said.

U.S. Defense Secretary Donald Rumsfeld said he had indications Iraq may have set fire to some wells, but Reuters eyewitnesses said there were no signs of fire at oil fields close to the border with Kuwait.

Iraq stopped exporting oil from its southern fields earlier this week, when United Nations inspectors left the country. Limited exports continued Thursday through a pipeline to the Turkish Mediterranean.

Heating oil for May delivery fell 2.51 cents to 75.9 cents a gallon. May unleaded gasoline price lost 3.76 cents to 89.59 cents a gallon.

War with Iraq may have little impact on oil prices

Thursday, March 20, 2003 By MICHAEL LEMANSKI Norwich Bulletin; mlemanski@norwichbulletin.com

Given the way a Middle Eastern leader's mild case of indigestion seemingly causes pump prices to fluctuate, it's reasonable to expect oil prices to rise when bombs fall on Iraq. Not so, according to the American Automobile Association.

"They don't expect anything to happen in terms of prices," said Fran Mayko, spokeswoman of AAA's Hamden office. "There are projections of higher prices, but it's hard to project at this point.

"There is absolutely no reason to rush to the gas pumps when war is declared."

Locally, gas prices are higher than a month ago -- and way higher than a year ago.

But, according to experts, it's due to a variety of factors ranging from war jitters, labor strife in oil export giant Venezuela (now settled), and a very cold winter.

Throw in the fact the U.S. gets most of its imported oil from Saudi Arabia, Mexico, Canada, Venezuela and Nigeria, Mayko said logic dictates an Iraq war will not harm U.S. supplies.

Proving that point Wednesday was the crude oil markets on the New York Mercantile Exchange. For the first time in months, crude oil was below $30 per barrel at $29.88, down from a high of $40 this year.

Still, Mayko points out, if people think gas is an issue and rush out to buy it after the "special reports" start appearing on TV, gas problems could be a self-fulfilling prophecy.

"That, right now, is the biggest worry," Mayko said, adding war jitters sometimes are worse that the war itself. "I think so. I think speculation has a lot to do about gas prices."

In short, Mayko said, motorists shouldn't panic when the bombs drop and fill up. If they do, supplies will be temporarily low, a condition that has already happened in southern California, she said.

"If people start to panic, it's only going to create problems and needless fuel shortages," Mayko said.

Local concerns

For example, in eastern Connecticut Tuesday, there were no signs of panic, but motorists were wandering the highways looking for the best gas deals, which are - on average -- up a nickel from a month ago and up 49 cents from a year ago.

Generally, the best prices -- under $1.70 -- can be found in Willimantic, Jewett City, and a couple of Brooklyn gas stations (along Route 6). Although some scattered, less than $1.70 stations, may be around.

The lowest price, apparently, was the Willimantic Xtra Mart on Main Street, which was $1.65 per gallon Tuesday.

For Brooklyn resident Tony Cataldo -- a physical therapist whose house calls put him on the road often -- high gas prices mean a drop in income.

"Theoretically, it cuts into what I make," Cataldo said Tuesday, filling up on $1.73 per gallon gas at the Brooklyn Xtra Mart on Route 6.

Norwich attorney John M. Newson said his 1993 Corvette requires ultra unleaded, which costs $1.97 per gallon at the Norwich Sunoco station on West Town Street, where he was filling up Tuesday.

He said the high fuel costs are making it more expensive to drive.

"It's high, but I remember a couple of summers ago. It was a little over $2 a gallon," Newson said, adding high prices are a tiny sacrifice for people to make. "If that's what is going to happen, then, I guess, we're going to have to deal with it. When you buy a car like this, it's going to cost you more money."

As for the consequences, Norwich gas station attendant Patel Anup -- whose family owns the West Town Street Sunoco -- said the war could hurt his family, especially if travel habits dwindle.

"Every week it's going up by 3 cents," Anup said. "You're losing because if people don't drive, it's not a good thing."

biz.yahoo.com Thursday March 20, 4:50 pm ET

NEW YORK (Reuters) - World oil prices extended a week-long slump to set new three-month lows on Thursday as the United States launched a widening offensive on Iraq and dealers predicted an easy victory for Washington. Prices swung wildly during the day on reports, denied by Baghdad, that three or four oil wells were on fire in the south of the country.

OPEC (News - Websites)exporters have said they could fill any supply gap resulting from the conflict in the oil-rich Gulf, and that markets were already well supplied. The West's energy watchdog, the International Energy Agency (IEA), said it saw no reason to release emergency stocks.

U.S. crude futures for May (CLK3) delivery fell $1.24 to $28.12, touching its lowest price since mid-December. Benchmark Brent crude oil fell $1.25 to $25.50 per barrel in London, after having touched a three-month low of $25.30.

Oil has shed a quarter of its value in the last week on a massive bet by investment funds that the war will end quickly, without causing major damage to oil installations or supply disruptions.

"The war premium is diminishing on a growing certainty that coalition forces will prevail," said Peter Gignoux, head of the London energy desk at Salomon Smith Barney.

Hours after U.S. cruise missiles hit targets in Baghdad, officials in neighboring Kuwait said oil output was normal, despite two Iraqi missiles hitting the north of the country.

Oil tanker traffic from the Gulf, which provides 40 percent of world oil exports, was also running smoothly, shippers said.

Market assumptions of limited damage to oil installations were challenged by earlier reports that three or four oil wells were on fire in southern Iraq, where half the country's oil is produced.

Defense Secretary Donald Rumsfeld said he had indications Iraq may have set fire to several wells, but Reuters eyewitnesses said there were no signs of fire at Iraqi oilfields close to the border with Kuwait.

Iraq has around 1,100 wells in total, analysts said.

Iraq suspended oil exports from its southern fields earlier this week, when United Nations inspectors left the country. Limited exports continued on Thursday from a pipeline to the Turkish Mediterranean.

OPEC TO FILL SHORTFALL

The Organization of the Petroleum Exporting Countries has reassured consumers that it was ready to tap its spare capacity to make up for any shortage from Iraq, but said markets were already well supplied.

"We are not thinking of any increase in production," said OPEC President Abdullah al-Attiyah. "Oil prices are heading downwards. This shows there is more oil in the market than the market can absorb."

Saudi Arabia, the world's biggest exporter, said its oilfields and export terminals were running normally and it was ready to pump more oil to stabilize markets.

Riyadh has already ramped up production well beyond nine million barrels daily, above an OPEC quota of eight million.

The IEA said there was no need for industrialized nations of the West to release emergency stocks as it was confident OPEC could cover the shortfall.

"At the precise hour we speak, I think it is not necessary (to release stocks)," IEA executive director Claude Mandil told Reuters. "We had a very strong statement from OPEC, which has said they will ensure any shortfall and we are confident they will do their best."

The IEA, which oversees some four billion barrels of stocks in 26 industrialized countries, said a release would become necessary only in case of a shortage that could not be covered by OPEC.

It also ruled out any unilateral reserves release by any one member, saying key importers the United States, Japan and South Korea all shared its view that a stock draw was not necessary.

www.kansas.com Posted on Thu, Mar. 20, 2003
BY DAN PILLER Fort Worth Star-Telegram

As zero hour approached Wednesday for the beginning of the second Gulf War, energy traders worked on the ironic realization that the world suddenly had a glut of oil and that prices are likely to fall.

Futures prices have dropped from a 12-year high of $37.10 a barrel just a week ago to close Wednesday at $29.88 for April delivery, just hours before the expiration of President Bush's ultimatum to Saddam Hussein that would trigger the onset of hostilities in Iraq.

Futures prices tend to run three to four weeks ahead of the pump prices. Whether that declining price holds long enough for motorists to benefit remains to be seen. But traders in New York and London obviously had separated their markets from the war anxieties of the region that holds the world's largest oil reserves.

"The world is beginning to realize that there is a bit of a glut of oil," said Leo Drollas, chief economist for the Center for Global Energy Studies in London.

In recent days some traders have begun to talk of prices dipping back into the low to mid-$20s price range from the $35 a barrel average that has held since Bush began his pressure campaign late last year against Saddam Hussein.

Such a decline would mirror the experience of 12 years ago when Operation Desert Storm was unleashed. Despite fears of disruption of Middle East oil shipments, Americans actually saw fuel prices decline by a third through early 1991 even before their armies stormed to a quick victory in Kuwait.

Today's market predictions of lower prices are based on the continued promises of Organization of Petroleum Exporting Countries producers to cover any losses to Iraqi production and ship to the United States and Western Europe the oil necessary to keep those economies going.

OPEC may have already primed the pump. Reports have surfaced this week of as much as 50 million barrels of oil at sea on tankers, a greater-than-normal volume in the pipeline.

Worldwide daily production now is 77 million barrels. U.S. producers pump about 7 million barrels a day. The United States imports the other 60 percent of the 19.5 million barrels it consumes daily.

OPEC also knows that the U.S. Strategic Petroleum Reserve is brimming with a four-month supply of oil, analysts said. It also has ready access to more than 5 million barrels daily from Canada, Venezuela and Mexico. OPEC can ill afford to blow off the American market as it did with two embargoes in the 1970s.

Since then, the United States created the Strategic Petroleum Reserve embraced more fuel-efficient automobiles and refocused the 60 percent of its daily oil supply that it received from the Middle East to more stable sources in this hemisphere.