Washington (Platts)--1May2008

Iraqi oil revenue is expected to reach $70 billion this year, more than
twice what was expected, thanks to higher oil prices and a boost in production
compared with a year ago, the US Inspector General's office said in a report
to Congress Wednesday.

The quarterly report, prepared by the Special Inspector General for
Iraq Reconstruction, or SIGIR, details Iraqi rebuilding efforts and progress,
and is also expected to renew calls in Congress for Iraq to pay more for its
own rebuilding efforts after the US-led invasion in 2003 that deposed
Saddam Hussein.

Initially, the Iraqi government estimated that oil revenue would be
$35.5 billion this year, based on $57/barrel oil at 1.7 million b/d. Now,
because of a surge in oil prices, which earlier this month rose to a record
just shy of $120/barrel, Iraqi oil revenue in the first quarter of 2008 alone
was $18.2 billion, the report said, based on an average price per barrel of
$91.66.

"Iraq's economy is benefiting from higher oil prices," the report said.
Exports in the first quarter averaged 1.97 million b/d, the report said,
unchanged from the fourth quarter of 2007, but up from 1.48 million b/d in the
first quarter of 2007.

Still, production is well below what it was before the US-led invasion,
when production was 2.58 million b/d from 1998-2002.

Democrats on Wednesday blamed the Iraq war for raising world oil prices
and gasoline prices to record highs.

"Disruptions from the war, insurgent attacks on the oil industry and a
lack of investment have all strangled Iraq's oil production," Senator Majority
Leader Harry Reid said in a statement, noting that US gasoline prices have
risen from $1.57/gal before the start of the war to $3.60/gal today.

"Higher gas(oline) prices are just one of the many costs of the war in
Iraq," he added. Reid voted, however, in 2002 to approve the Iraq war.

The increase in Iraqi revenues is also likely to prompt some in Congress
to scale back appropriations for Iraq's reconstruction. Since April 2003, the
US Congress has allocated more than $46 billion for Iraqi reconstruction and
relief efforts, of which $10 billion is yet to be spent.

This year, the government of Iraq is budgeting $13 billion for capital
investment, the report said. Deputy Prime Minister Barham Salih said Iraq's
Council of Representatives will issue a supplemental budget later this year to
appropriate the oil windfall income, the report said.
--Daniel Goldstein, daniel_goldstein@platts.com

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