23 April 2003
The first Iraqi oil production since the fall of Saddam Hussein’s regime is set to restart next week from the northern Kirkuk complex, but would be limited to supplying the domestic market in terms of crude for refineries and natural gas for power stations, according to a senior Iraqi official.
The plans show Iraqi officials taking the initiative on this and other aspects of the war-damaged oil sector, independently of embryonic — and still largely secret — US plans for central management of the industry. The Iraqi officials are firmly focused on meeting local needs, saying exports can wait for now.
“North Oil Co. [NOC] production facilities are intact except for the wide looting of offices including equipment and cars so we can resume production next week,” said Thamer al-Ghadban, who served before the war as director general of planning at the oil ministry, and now heads an ad hoc task force at the ministry. The production will supply Baghdad’s Daura refinery, which restarted operations Apr. 18 using crude from storage, as well as the Baiji refinery, which is expected to restart next week, al-Ghadban told International Oil Daily in an interview in Baghdad.
The decision came after the task force received reports from messengers sent to NOC Monday to report on the situation there.
The task force was set up by senior Iraqi oil executives to gather and coordinate information on the country’s oil industry, and to get the sector going again. It was established independently of US plans for a civil administration in Iraq, which center instead on management of the oil sector by a board of non-Iraqi and Iraqi experts to be led by former Shell Oil CEO Philip Carroll.
Until Tuesday, oil ministry officials in Baghdad had not been contacted by any US officials, except for two army majors who have been coordinating the return of utility services in Baghdad.
So far, coordination with the US military has been taking place out of necessity, Iraqis say. And with little information still available on US plans for the oil sector, Iraqi officials say the ministry is the only authority that is currently in charge of the industry, and that they will continue with their jobs and deal with American officials when they show up.
From Washington’s perspective, the US Army Corps of Engineers is officially in charge of repairing and operating Iraq’s oil industry, through the Restore Iraqi Oil program that is based temporarily in Kuwait. The USACE said last week that it was interviewing and hiring oil workers in southern Iraq to resume operations at the Rumaila fields. But al-Ghadban also said he is sending a team to Basrah to re-establish liaison with South Oil Co. (SOC) officials who have been unable to contact the ministry since telecommunications facilities were bombed during the war.
“No one told us what to do or what not to do. We know our business well and we know the set up. We will continue working until an official position is formulated as to how Iraq would be run,” al-Ghadban said.
As to who would formulate that position, al-Ghadban, like many others around him, said he just doesn’t know. “We hope to see an official Iraqi government soon,” he told International Oil Daily.
Retired US general Jay Garner, who heads the Office of Reconstruction and Humanitarian Assistance is expected to hold a conference Thursday to outline and discuss how the civil administration will be run.
Talking in the bare hall of the oil ministry — where chairs, tables, telephones, and a model of the building that dominated the room were stolen by looters after the fall of the regime, until US forces moved to secure the building — al-Ghadban said that most of the ministry’s data and archives have been preserved.
Surrounded by buildings with blackened facades that once housed the ministries of irrigation, transportation, and the branch of the International Olympic Committee, some standing only as skeletons, the oil ministry stands out as having been spared during and soon after the collapse of the regime. US soldiers still control the entrance and search employees and visitors.
“I’m confident things will look much brighter next week,” said al-Ghadban, who is trying to organize the return of employees to different departments as well as the State Co. for Oil Projects and Oil Exploration Co., the two companies under the auspices of the ministry that have offices in the same building.
Only technical staff have been asked to resume work this week. On Tuesday, dozens of employees arrived at the ministry’s gate only to be told to come back next week. Officials in the finance department started paying March salaries on Tuesday from cash in Iraqi dinars kept in safes. No one knows whether April salaries will be paid or by whom.
During the conflict, looters broke into the State Oil Marketing Organization (Somo) building, next to the ministry, and set it on fire. Employees have been asked to clean up the place and get back to work, although no oil marketing is expected to take place there for some time, according to ministry officials.
The priorities of the ministry task force are oriented toward domestic needs, al-Ghadban said.
According to the oil ministry’s plans, in a first stage, oil production from Kirkuk would supply the Daura refinery with 60,000 barrels per day by pipeline through the K2 junction. Later, it would be supplemented by additional volumes pumped into the strategic north-south pipeline through the K3 junction at Haditha. This could push supplies to Daura up to 110,000 b/d, the refinery’s maximum prewar capacity.
Before the war, Daura was supplied by crude from Kirkuk in the north and Basrah in the south. Ministry officials say the latter option is not yet on the cards until they are able to evaluate the situation at the southern fields. They are planning a visit there in the coming days.
Gas production has already started to feed important electricity generating stations. “The North Gas complex is also intact and already resumed production of gas several days ago from the Jambur gas cap to the Daura power station,” al-Ghadban said. Natural gas production will increase gradually once oil production resumes from the Kirkuk fields.
Non-associated cap gas is also being produced from the Ajeel field — previously known as the Saddam field, but which like many buildings, squares, and facilities in Iraq has now returned to its former name. Ajeel gas is currently supplying power stations in Kirkuk.
The big Baiji refinery complex, with a capacity of almost 300,000 b/d, was not damaged in the fighting and has been secured by US forces.
“We are coordinating with NOC to supply Baiji with crude from Kirkuk as well and restart it next week at a rate of either 70,000 b/d or 150,000 b/d initially,” al-Ghadban said. “It all depends on the ability of the power station in Baiji to drawn on fuel oil from the refinery to avoid bottlenecks.”
A team of technical experts from the ministry is expected to inspect Baiji Wednesday and report on the exact day operations should resume.
Distribution of liquefied petroleum gas (LPG) — an important domestic fuel — would also resume next week, in a bid to overcome shortages around Baghdad.
By Ruba Husari, Baghdad
(Published in International Oil Daily April 23, 2003)