Oil exports boom as attacks on pipelines cease

updated 4:52 p.m. ET June 29, 2006

BEIJI, Iraq - For more than two years the attacks came like clockwork. As soon as the military secured and workers repaired the pipelines from Iraq’s northern oil fields, just when the valves were about to open, insurgents would strike.

But roughly three weeks ago they suddenly stopped, letting crude oil flow freely from Iraq’s vast reserves near Kirkuk.

Perhaps insurgents feared reprisals in Salahuddin province, where pipelines from Kirkuk flow to the country’s largest refinery in Beiji. Maybe terror leader Abu Musab al-Zarqawi’s death disrupted a chain of command that ordered the attacks, military officials said.

Whatever the cause, the U.S. forces welcome the change, even if history since the U.S.-led invasion in 2003 has shown the free flow of oil in Iraq is only temporary at best.

“I just hope that it lasts long enough where people start realizing ‘Damn, we’re making money. We could be rich like Kuwaitis,” said Army Lt. Col. Craig Collier, deputy commander of the 3rd Brigade, 101st Airborne Division. “But what is really going on? We don’t know.”

Moving 2.5 million barrels a day
In the past three weeks, Iraq has exported 6.2 million barrels of crude oil to Turkey from its northern fields. Total exports from Iraq in that period, including the oil fields in the south, have increased to 2.5 million barrels per day, the highest level since the invasion, the Oil Ministry reported.

With a going market price of $60 a barrel in Turkey, military officials believe exports so far equate to about $372 million since oil began flowing from the north. Oil is the biggest source of income for the Iraqi government, which is struggling to curb violence and restore the supply of electricity and water.

Iraq, a founding member of the Organization of Petroleum Exporting Countries, sits atop the world’s third-highest proven reserves. With an estimated 115 billion barrels, exceeded in OPEC only by Saudi Arabia and Iran, the Bush administration predicted three years ago that Iraq would finance its own reconstruction.

But Iraq’s oil production slipped after the invasion, stuck below even the reduced levels that prevailed in the 1990s, when the country was under tough U.N. sanctions.

The 3rd Brigade, nicknamed the “Rakkasans,” has studied the intricate web of oil corruption near the refinery in Beiji as part of a renewed effort to restore the oil industry.

Targeting the smugglers
Working with other coalition and Iraqi soldiers, they targeted oil smugglers, who they believe are behind many of the attacks on the fuel export lines. The black market truckers buy gasoline or diesel at Iraq’s government-subsidized prices and drive to Turkey to sell it for 10 times the amount, so official exports compete and cut into their profits.

Despite scores of arrests, the attacks still came — always as the oil storage reservoirs near Tikrit neared capacity at 1.5 million barrels. The timing was so perfect that the military suspected an insider at the refinery in Beiji or the oil fields directed the strikes.

Ties to the insurgency also were suspected.

Iraq has the capacity to ship 500,000 barrels a day from its northern oil fields to the refinery, so disabling the pipeline with bullets or bombs makes a major dent in revenue to the cash-starved government. Insurgents also could be profiting directly with a share of black market revenue, military officials said.

When pipelines are down, excess oil is shipped from Kirkuk to the refinery in Beiji — oil that would normally be exported. It is routed back to the refinery to keep workers employed and gasoline available. The refinery and its neighboring power plant, which supplies electricity as far as Baghdad, are the largest industries in northern Iraq.

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