CBSN

Will Iraq Have To Import Oil?

Basra Oil Refinery, Basra, Iraq, 4-23-03
AP
Iraq's huge oil fields are pumping again, but kinks in the flow of gasoline and other refined fuels mean a country with the world's second largest oil reserves may have to import stopgap petroleum products.

The danger of running dry is not high, but the risk highlights the fragility of efforts to restart Iraq's once booming oil industry. Crude oil is plentiful. The trick is turning it into gasoline, fuel oils and lubricants that can keep Iraq running.

"We need the refineries to start producing more here," Clarke Turner, an oil official with the interim U.S. postwar administration said Sunday. "If they don't, then we'll have to start looking at importing refined product."

Iraq's three refineries normally produce enough for domestic needs and for export. But one is hobbled by sporadic electricity shortages, another is running far below capacity and the third is still idle.

Restarting the oil industry is key to the U.S. plans for rebuilding Iraq. The refinery problems won't affect exports of crude oil, which will be sold to help pay for reconstruction, but refined fuels are crucial for the domestic economy.

Iraq has more proven oil reserves than any country except Saudi Arabia, and before the war it was pumping around 2.8 million barrels a day, or 3 percent of global supplies. It needed around 300,000 barrels a day for domestic use, by some estimates, and the balance was exported.

Pumping resumed in the Rumeila field in southern Iraq near Basra on Wednesday, but the refinery in Basra isn't working.

Its planned restart has been pushed back to Wednesday from Monday. Rafael Jabba, director of economic activities for the U.S. Agency for International Development in Iraq, said the problem was leaky pipes.

"They have cracks and they are leaking and they have to be repaired before they can fire up the plant," Jabba said. He was not sure whether the damage was caused by the war or by years of neglect under the impoverished regime of Saddam Hussein.

"They do have supply of petroleum, oil and lubricants in Basra, but they are starting to run out," Jabba said. It was unclear how many days' supply were left.

At top speed, the Basra facility can refine 140,000 barrels a day. More than 180,000 barrels of crude oil are in its storage tanks awaiting refining, Turner said.

In northern Iraq, the Bayji refinery near Kirkuk has a capacity of up to 290,000 barrels a day, but Turner said there are reports of sporadic power outages at the plant.

Baghdad's Daura refinery is getting a trickle of oil from Iraq's northern fields and is producing about 45,000 barrels of fuel a day. But that is just 45 percent of capacity.

With refined stocks dwindling, U.S. officials said they may need to temporarily import gasoline and other refined products, especially in the south, although Turner said there were no plans yet to do so.

Gary Volger, an oil adviser to Jay Garner, the retired U.S. Army lieutenant general overseeing postwar reconstruction, said U.S. officials had received commitments from Kuwait to supply fuel and were seeking deals with other Persian Gulf countries.

By Hans Greimel