By Simon Webb
Reuters, 09 March 2006
VIENNA - Fuel shortages this year will add to growing frustration among Iraqis, as the country suffers worsening sectarian violence and struggles to rebuild its battered economy, a top oil official said on Thursday.
Both the country and its oil industry, the source of the foreign revenue Iraq needs for reconstruction, will need years to recover from current turmoil, said Shamkhi Faraj, director general of economics and marketing for state oil marketing agency SOMO.
"We will have to continue for another four or five years of this," he told Reuters in an interview. "In this four or five years I see a rebuilding of the infrastructure of oil."
This year, budget restrictions mean Iraqis will struggle to fill up their cars and heat their homes.
"There will be a gasoline shortage and a gas oil shortage," Faraj said. "We don't have much money available for imports."
Iraq has set aside $2.4 billion in its budget to import oil products in 2006, a cut from the $4 billion import bill last year, he said.
Even when there was more money for imports in 2005, Iraqis faced long queues at the pumps as militant attacks on fuel convoys and oil pipelines cut already paltry supplies.
Iraq will lack around 20,000 barrels of gasoline a day in 2006, over 15 percent of total gasoline demand of around 126,000 bpd, Faraj said.
Oil exports, which in December hit their lowest level since restarting after the U.S.-led invasion of Iraq in 2003, should consolidate their recovery in March but remain below target as the country's production problems continue.
"Exports are not picking up as planned. Production is also another problem," he said.
"There are so many problems, everything is going wrong. It is the security, the investment, availability of equipment, service companies are not prepared to come into the country. Even the weather conditions were bad in December. Nothing is going well."
Exports from the southern Basra terminal were expected to come in at around 1.4-1.5 million bpd in March, little changed from 1.42 million bpd in February, but higher than the low of 1.1 million bpd in December.
LOST PRODUCTION
Iraq has around 200-300 wells at its 13 southern fields that were blocked with cement during the war with Iran, but it cannot get the explosives it needs to unblock them and boost production, Faraj said.
International oil service companies are reluctant to work in Iraq due to insecurity.
"We have 12-13 big fields in the south and these oil fields could bring 3-3.5 million bpd extra production," he said.
Iraq is struggling to buy equipment to increase output and do routine maintenance.
But even with the shortages, the country aims to boost output from the south to 2.15 million bpd this year, up from current output of around 1.75-1.8 million bpd, he said.
In the north, output is at 300,000 bpd, less than half of output capacity of 700,000 bpd.
SOMO has yet to cut crude oil export allocations to customers even though exports this year have been well below its 1.57 million bpd contracted volume.
"We are hoping we can export more later," he said. "We have not cut allocations."
Iraq expects to issue a buy tender by the end of March to secure oil products from Turkey from April, including around 11,000 bpd of gasoline, he said.
Iraq's refineries are currently processing about 450,000 bpd, he said. The plants have effective capacity of 600,000 bpd after recent maintenanance but rarely operate at that level due to oil pipeline sabotage, Faraj said.
Gasoline imports should come to around 44,000 bpd this year, while Iraq's refineries should produce around 63,000 bpd.
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Citation: Simon Webb. "Fuel shortages to add to Iraq woes this year - SOMO," Reuters, 09 March 2006.
Original URL: http://www.alertnet.org/thenews/newsdesk/L09730459.htm
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