Read Deborah
Haynes's Inside Iraq blog
The gaunt 52-year-old Iraqi army private stands on top of a rudimentary guard
post fashioned from huge, sand-filled hessian sacks, brandishing a rifle.
The post stands in a strip of featureless brown desert, broader than a
mo-torway, which is flanked by deep ditches, great earthen berms and
chain-link fences covered in coiled razor wire that stretch away to the
horizon in two almost impenetrable parallel lines.
“If bad people come in here we’ll shoot them,” declared Abdullah Abdullah
Mustafa proudly.
There are Iraqi army guard posts like Private Mustafa’s almost every mile
along this extraordinary new construction. They appear to be guarding
wasteland, but Mustafa and thousands like him are actually helping to
protect the very lifeblood of their country.
Buried beneath the surface are the pipelines that carry Iraq’s liquid gold –
crude oil – from Kirkuk’s giant oil-fields 50 miles (80km) down to Baiji,
and then up to Turkey for export to the energy-hungry West.
The US Army Corps of Engineers began building this $30 million (£15 million)
Pipeline Exclusion Zone (PEZ) between Kirkuk and Baiji last July, and will
finish it next month. It has already reduced dramatically the number of
attacks by those Sunni insurgents who have been waging a second,
less-noticed war over the past four years – not against US troops or Shias
but against the oil industry on which Iraq’s entire economy depends.
As a result, that industry is displaying unmistakable signs of recovery for
the first time since the US invasion of 2003. Exports have risen almost to
prewar levels, and with Iraq sitting on 113 billion barrels of proven
reserves – the third largest in the world – that is welcome news not just
for Baghdad but for a world reeling from record oil prices.
The PEZ is only one measure taken by the US and Iraqi authorities to secure
the Kirkuk to Baiji pipelines. They have also replaced Sunni and Shia
soldiers with more aggressive, trustworthy Kurds such as Private Mustafa,
and removed the 3rd Strategic Infantry Battalion which was, say US army
officers, “deeply corrupt”. Its locally recruited members were almost
certainly working with the insurgents – telling them when the oil was
flowing, helping them to steal it, even staging fake assaults on their own
positions to conceal their duplicity.
Since August there have been just two attacks, both in areas where the PEZ was
unfinished, said Lieutenant-Colonel Kevin Hudie, of the 6th Field Artillery,
who is in charge of oil infrastructure security for the Kirkuk region.
The huge 46-inch wide pipeline that carries the crude 180 miles north from
Baiji to the Turkish border is too long for a PEZ and a little less secure –
14 guards have been killed since September. But even there attacks have been
greatly reduced, largely through coopting local tribes by giving their young
men jobs in the Oil Police, the revamped, 31,000-strong mini-army that
protects Iraq’s oil infrastructure.
“If there are attacks in their sectors these people will be fired. If there
are no attacks they will be rewarded,” said Manaa Abdullah, the wily,
British-educated head of the state-owned Northern Oil Company.
The results of this improved security are startling. The pipeline to Turkey
was operational just 17 days in the first seven months of last year, and
every day but five in the last quarter. Two-thirds of the 48 million barrels
of oil exported from Kirkuk last year were exported in those last three
months alone. A second $100 million PEZ will be constructed this year to
protect the 130-mile line from Baiji to Baghdad.
Kirkuk accounts for roughly a third of Iraq’s oil production. Fuelled by its
recovery, Iraq is producing an average of 2.4 million barrels a day – just
below its prewar level of 2.6 million – with the Oil Ministry confidently
predicting an output of 3.5 million by next year. That would match the level
Iraq last achieved in 1979, just before the Iran-Iraq War. “It’s an
ambitious goal, but it’s possible,” said a US official closely involved with
the industry.
Thanks to rising oil production, the International Monetary Fund believes that
Iraq’s battered economy will grow 7 per cent this year. And with oil prices
near record highs, the US Special Inspector for Iraq this week forecast a
$15 billion windfall for a country whose $48 billion budget for 2008 was
calculated when oil, which accounts for 90 per cent of its revenues, fetched
a mere $55 a barrel.
US officials say the Iraqi Government now has far more money than it has the
capacity to spend. In 2006, for example, the Oil Ministry spent just 3 per
cent of the $3.5 billion it was allocated for oil reconstruction projects.
The tragedy is that the recovery has taken so long. At the time of the US
invasion, Vice-President Dick Cheney and other senior US officials boldly
predicted that production would exceed three million barrels a day within
eight months, generating more than enough money to rebuild Iraq.
They underestimated the desperate state of Iraq’s oil infrastructure after 23
years of war, sanctions and postinvasion looting. “It was held together with
bits of string and chewing gum,” said one US official. Even now the
facilities that The Times visited in Kirkuk this week were shockingly
corroded and dilapidated.
The Bush Administration also failed to foresee the virulence of the
insurgency. The website Iraq Pipeline Watch records 466 attacks on oil
infrastructure or employees since 2003, and that is probably a fraction of
the real total. US officials reckon as many as half the industry’s most
skilled workers fled Iraq, or were killed, as Iraq descended into mayhem.
The insurgents have used the oil that was supposed to finance the country’s
reconstruction to fund their efforts to destroy it.
They and other criminals have routinely tapped into the pipelines to steal
oil, hijacked tankers and diverted huge amounts of oil from production
facilities with the help of corrupt employees. “If there was oil flowing for
one day, as soon as insurgent groups heard about it they would be tapping
into the pipeline and filling up tankers,” said General Samey Ameen
Alahwany, head of the Oil Police in northern Iraq. A US army officer told
how a deal to supply Jordan with 10,000 barrels of crude a day was abandoned
last autumn when between 100 and 120 36,000-litre tankers vanished.
Last July the US Government Accountability Office reported that 100,000 to
300,000 barrels of oil worth $5 million to $15 million went unaccounted for
each day. The previous month the Pentagon calculated that as much as 70 per
cent of fuel processed at the Baiji refinery, Iraq’s biggest, was lost to
the black market. A US report in 2006 said that insurgents, aided by corrupt
officials, were raising $25 million to $100 million a year from oil
smuggling.
The same year an Iraqi Oil Ministry report said that endemic corruption and a
“new class of grand mafiosi” were costing the country billions. Corruption
remains a serious problem, but with the security situation now slowly
improving, Iraqi officials are raising their sights. The Oil Ministry will
soon invite bids from international oil companies to increase output from
Iraq’s half-dozen poorly-managed, investment-starved “super-giant” fields
from early next year. That would more than double production to six million
barrels a day within three or four years, Hussain al-Sharistani, the Oil
Minister, told The Times.
Thereafter, multinationals will be invited to develop new fields. Competition
will be intense, with no guarantee that Western companies will prevail.
“Everybody in the world, more than 45 companies, have approached us .
. . the Chinese, Russians, Indians, Brazilians,” Mr al-Sharistani said.
Up in Kirkuk, which sits on reserves of 11 billion barrels and where even the
air smells of gas, Mr Abdullah exudes optimism. “We’re getting wiser and
more secure and in control of the situation,” the head of the Northern Oil
Company said.
Colonel Hudie expressed himself more bluntly. “The oil industry is getting
back on its feet. But just wait till we get the Western companies here.”
In the pipeline
113bn Barrels of proven oil reserves in Iraq, the third highest after
Saudi Arabia and Iran. Experts say the real figure may be nearly double that
as so little of the country has been properly explored
2.4m Barrels of oil a day now being produced, below the record of 3.5
million in 1979, the year before the Iran-Iraq war began, but nearly back to
the 2.6 million before the US invasion of 2003
$39bn Amount earned by Iraq’s oil exports last year, up 31 per cent.
The daily average exported was 1.6 million barrels, up 9 per cent
90% Oil accounts for 90 per cent of the country’s revenues
60% Despite its sea of oil, Iraq imports nearly 60 per cent of its
petrol and other oil products because its refineries cannot produce enough
Source: Office of US Special Inspector-General
