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Iraq oil pipeline blasts squander revenue Original Source Link: (May no longer be active)
http://www.miami.com/mld/miamiherald/business/national/9998195.htmhttp://www.miami.com/mld/miamiherald/business/national/9998195.htm
Posted on Sat, Oct. 23, 2004
Iraq Oil Pipeline Blasts Squander Revenue
JIM KRANE
Associated Press
BAGHDAD, Iraq - It was supposed to be the linchpin of Iraq's bright future: oil, and plenty of it, pooled in great reservoirs below the surface of this tormented land.
But some 250 guerrilla attacks have blown apart pipelines and other oil infrastructure, squandering between $7 billion and $12 billion in potential export revenue. Experts say the losses, as much as $490 for each of the 26 million Iraqis, have hamstrung Iraq's development.
The country's sputtering oil revenues have fallen far short of prewar Bush administration predictions that Iraq could finance its own reconstruction.
"The country has been deprived of badly needed revenue to rebuild infrastructure, jump-start the economy and alleviate high unemployment," said Jamal Qureshi, an Iraq oil sector analyst for Washington-based consultancy PFC Energy.
More than $1 billion in Iraqi oil revenues also flowed to U.S. and British firms, who landed expensive contracts from the now defunct U.S.-led occupation authority, often without competitive bidding.
Halliburton Co., the oil services company that Vice President Dick Cheney once ran, landed 60 percent of the large contracts financed by Iraqi oil funds, audits show.
But Iraq's losses don't just affect Iraqis. They also mean U.S. taxpayers must pay a larger share of the reconstruction, starting with the massive $18.4 billion approved by Congress last year. The American outlay, only $1 billion of which has been spent, comes despite pre-invasion predictions of Deputy Defense Secretary Paul Wolfowitz, who said Iraqi oil could generate $50 billion to $100 billion over two or three years.
"We're dealing with a country that can really finance its own reconstruction, and relatively soon," he told a House committee in March 2003.
But 19 months after the invasion, Iraq has generated just $17 billion, according to Oil Minister Thamer al-Ghadhban. At current rates, Iraqi oil sales might not reach $25 billion by Wolfowitz's two-year mark.
Al-Ghadhban estimated emergency repairs and lost revenue had cost the country $7 billion since exports resumed after the invasion, an amount equivalent to almost a third of this year's $22.4 billion national budget.
"There is an aggressive assault on our oil installations, and some of our people have been killed," said Sameer Jassim, spokesman for Iraq's Southern Oil Co. "As a country that just came out of a war, we need the income to reconstruct the country. That $7 billion should have gone to provide services Iraqis need."
One oil analyst put Iraqi losses even higher, at $12.7 billion. Sharif Ghalib of Energy Intelligence Research in New York said he reached his estimate by comparing current revenues with an estimate of what Iraq would've earned had it not been invaded, even considering U.N. sanctions in place under Saddam.
Iraq's oil production has reached 2.5 million barrels per day but is still short of the prewar levels of 2.8 million barrels per day. Current exports run between 1.8 and 2 million barrels per day.
The incessant pipeline blasts, which have destroyed crucial choke points - such as a junction at the northern city of Beiji that has been bombed twice - have left crews repairing creaky 1970s oil infrastructure they were sent here to replace.
"What Iraq needed to do was rehabilitate the industry, but the focus has been on repairing the damage from sabotage," said Walid Khadduri, an Iraqi who edits Middle East Economic Survey, an oil journal based in Nicosia, Cyprus.
Iraq's oil infrastructure hasn't had proper maintenance since the start of the 1980-88 Iran-Iraq war and upgrades were halted by the 1991 Gulf War and U.N. sanctions, Khadduri said.
The entire system - pipelines, underground reservoirs, refineries and export facilities - needs to be overhauled, he said.
A ferocious guerrilla war is preventing such investment and thwarting companies that would develop Iraq's remaining untapped oil fields. Khadduri said known oil fields could produce some 2 million more barrels per day if they were developed.
"It's very clear that oil isn't going to make Iraq rich," said Keith Crane, an economist with the Rand Corp. and former adviser to the U.S.-led occupation in Baghdad.
Even if Iraq succeeds in tripling output by 2010, as is hoped, Iraq's oil bounty will, by itself, provide a per capita income of around $1,500 per year, making Iraqis in 2010 poorer than the average Brazilian is today, Crane said.
Smuggling also has taken a chunk of oil receipts. Iraq uses oil revenue to import $200 million in gasoline per month. As much as 25 percent of that subsidized fuel, which sells at the pump for the equivalent of five cents per gallon, is smuggled and resold in neighboring countries.
ON THE NET
Iraq Revenue Watch: http://www.iraqrevenuewatch.org
Iraq contract audit: http://www.iamb.info/auditrep/disburse101204.pdf
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