Iraq's new interim government, which took power on Monday may gradually be able to alleviate the sabotage attacks that have plagued the country's efforts to revive post-war oil exports.
Repeated attacks on pipelines and wells, which have kept exports well below pre-war capacity of 2.2 million barrels daily, are expected to continue even after the US-led occupation formally ended on Monday.
But in the secretive world of Iraqi oil, there is hope that former ruling Baath Party members appointed to the interim government could negotiate an end to attacks as they adopt a nationalistic line, emphasising ownership of resources and placating millions eager to benefit from the country's wealth.
Industry insiders are envisaging a return to Saddam-like arrangements, when army divisions backed by planes, security organisations and tribesman guarded the pipelines, shooting suspected intruders first and asking questions later.
Installations are protected at present by oil ministry guards and staff of Erinys, a South African security company hired by the US-led occupation authority.
Operating in the open in 12-hour shifts, guards are paid around $120 a month. They are generally seen as demoralised, underpaid, lacking equipment and intelligence information to back them up. Guards in front of oil installations sometimes demand tips from visitors.
This could change. Iyad Allawi, the intelligence-minded interim prime minister, is reorganising the security apparatus with a focus on guarding infrastructure.
President Ghazi al-Yawar, scion of the Shumar tribe, is seen as capable of co-opting tribesmen to guard the oil frontier, similar to the strategy of Saddam.
Protecting oil infrastructure will also require detente with some of those who have been fighting the occupation.
"Sabotage is so easy now. Pay somebody $1,000. He will ride his donkey to a pipeline, wait until patrols pass then plant a bomb," said one international contractor.
"Iraqi nationalist insurgents could be willing to give the interim government a chance. But with oil prices at $35 to $40 per barrel, the list of people who would benefit from the disruption to Iraqi supplies is big," he said.
The attacks have also targeted foreign contractors. Many international companies have chosen to leave the country, although funding became available for $1.5 billion worth of projects to repair the oil industry.
An internal oil ministry report said another 226 US- funded projects that were due to finish by April are far behind schedule and most have not even started. The projects were mostly awarded to US oil company Halliburton.
Halliburton's difficulties - some say blunders - could serve as a lesson for other service companies to improve their logistics, the quality of their subcontractors and their security if they risk taking projects in Iraq.
Global oil majors, eyeing investment potential in a country that holds the world's second largest oil reserves, need stability before starting to invest.
Oil Minister Thamir al-Ghadhban is working on setting up an investment framework that includes a strong state company and foreign involvement to help double Iraq's output to five million barrels per day by the end of the decade.
Ghadhban has a reputation for putting national interest first and will be no pushover in negotiations with US majors, although Iraq's outgoing governor Paul Bremer essentially appointed him, supporters of the new minister say.
Saddam threw Ghadhban in jail in the 1990s for criticising the president's spending on grandiose projects and diverting resources away from the oil industry during the crushing economic embargo.
Iraq's mismanagement problems have not been solved. A new report by international accounting firm KPMG said the occupation authority sloppily recorded Iraq's oil revenue, which encouraged the potential for fraud.
The report also criticised the oil ministry for failing to keep records explaining why it sometimes does not award oil sale contracts to the highest bidder.
It remains to be seen whether Ghadhban, an insider who has worked in the oil sector during three wars in the last 25 years, can end mismanagement and solve the security problem.
The credibility of the government, which was also handed control of the oil revenue, could be at stake.
Comments
Comments are closed.