YEARENDER: Iraqi oil output, exports fall in dismal end to 2005

Baghdad (Platts)--3Jan2006

Iraqi oil production in 2005 averaged a dismal 2.1-mil b/d, down 200,000
b/d from 2004 and far below official targets set by successive Iraqi
governments and their US-led coalition allies due to continued attacks on
pipelines and energy infrastructure.

     By December, Iraq's oil minister, Ibrahim Bahr al-Ulum, had resigned in a
dispute with the government over retail fuel price hikes with no end in sight
to the country's chronic shortage of refined products.

     Oil field security worsened in parts of the country, particularly Baghdad
and the northwest. A website tracking hits on oil installations since the end
of the US-led war in April 2003 listed 282 insurgent attacks on pipelines and
other oil installations to October 2005. Of those, 96 were in 2005.

     In 2004 the interim government had set a crude output target of 2.8-mil
b/d for 2005, close to pre-war capacity. Northern oilfields were to provide
600,000 b/d and southern fields 2.2-mil b/d. The ministry aimed to raise
production to 3-mil b/d by the end of 2005.

     But monthly oil ministry figures from November 2005, obtained by Platts,
show production averaged only 2.1-mil b/d, of which northern fields provided
only 330,000 b/d. In 2004, output was 2.3-mil b/d, with northern production
averaging 450,000 b/d.

     Production in January and February 2003, the last two full months before
the invasion that ousted Saddam Hussein, averaged 2.8-mil b/d with northern
production at 880,000 b/d. The declines since then are a result of war damage,
looting, sabotage and the slow pace of reconstruction.

     Iraqi officials say exports in 2005 were also 2004's levels, falling to
an average 1.435-mil b/d through November. Of the total, 1.39-mil b/d was
exported from the southern Basra and Khor al-Amaya terminals; 35,000 b/d from
Turkey's port of Ceyhan and 10,000 b/d from the Sufaya field to Syria. 

     Ceyhan shipments were hobbled by pipeline blasts while exports from the
south were plagued by rough weather, power outages and inadequate crude
storage facilities.

     In 2004, exports averaged 1.526-mil b/d, of which 1.4-mil b/d came from
the south and 110,000 b/d from Ceyhan with 5,000 b/d going to Syria.

     Officials say the decline in 2005 export volumes cost the country $3-bil
in lost revenue.

     Reasons for the upstream output lag vary from north to south. The
northern system, managed by the North Oil Company, has suffered from a higher
incidence of sabotage and attacks on infrastructure. Some wells in the Khabaz
and Ajeel fields were set alight by mortars and bombs. Pipelines between
Kirkuk and the Baiji refining complex were also frequently attacked. NOC was
therefore able to pump only two thirds of its capacity of 500,000 b/d.

     Rehabilitation of northern oil facilities coordinated by the US Project
and Contracting Office and funded by the US Iraq reconstruction grant aims to
get the facilities back to their pre-war state. Progress was made there in
2005 when prime contractor Parsons Iraq Joint Venture completed five projects
at a cost of $7.2-mil and has 16 more in progress at $116-mil, all due for
completion in first quarter of 2006. Five are to repair de-gassing stations,
which should add to production capacity.

     In the south, key PCO contractor KBR, a Halliburton unit, completed
rebuilding the water intake and eight satellite injection stations around the
vital Rumaila fields. But water injection, key to maintaining reservoir
pressure, is still at only 70% of capacity due to deteriorating pipes and
inadequate supply of treatment chemicals. 

     KBR is also rehabilitating 13 oil output and three gas compression
stations, to be completed in the second half of 2006.

     But southern drilling and workovers are well behind schedule, causing
many wells to be shut down due to high water content and resulting in
inefficient output distribution across the oil fields. 

     A contract by a Romanian-backed local contractor to rework 60 wells has
not yet been implemented and a $37-mil KBR contract for logging,
re-perforating and re-completing wells in West Qurna and Rumaila was canceled
by PCO in August before it began. 

     Southern Oil Co, the client, and contractors are still hindered by the
absence of foreign talent, equipment and materials, particularly perforating
charges made of high explosives, which the US-led authorities will not allow
Iraq to import. Prime Minister Ahmed Chalabi, the current caretaker oil
minister, referred to this problem in a Nov 4 television interview, saying
Iraq could raise production by 500,000 b/d if the material was available.

     If all current projects are completed on time, Iraq should be able to
produce 2.3- to 2.6-mil b/d by the second half of 2006, senior oil ministry
officials say. Of that total, the northern fields would provide 500,000 b/d
and the south 1.8- to 2-mil b/d. The targeted 2.8-mil b/d would be achieved by
the end of 2006.

		--Faleh al-Khayat, newsdesk@platts.com

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