Aug.
2001 Vol. 222 No. 8 International Outlook
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MIDDLE EAST
Dr. A. F. Alhajji, Contributing Editor,
Boulder, Colorado
Iraq
Iraq continued to play a pivotal role in world oil
markets despite UN sanctions. Iraq curtailed its production twice this year, in January and June, to exert
pressure on the UN and defy sanctions. Iraq declared victory recently when the newly proposed "smart
sanctions," invented by the Bush administration failed to gain momentum in the Security Council. In an
ironic twist, most of the Iraqi oil is exported to the U.S. Despite sanctions, various countries signed free
trade agreements with Iraq including Syria, Egypt and Tunisia, and many others resumed civilian flights to
Baghdad.
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Experts warned recently that Iraqs production
capacity is deteriorating, and output may decline by 800,000 bopd very soon, unless spare parts are received
immediately. As of early May, Iraq had received only 35% of oil equipment and spare parts purchased via the
oil-for-food program. Many of the tools and equipment are perceived by the U.S. as dual-use equipment. In
April, the UN Sanctions Committee put on hold a contract awarded by Iraqs Northern Oil Co. to China
National Petroleum for the drilling of 45 wells, allegedly because the equipment contains too many "dual
use" items. Based on UN information, 1,693 contracts, worth about $3.7 billion, are on hold as of May 31,
2001.
Exploration. In May, Iraq announced the
discovery of new oil fields in its western desert. Surveys are being carried out by North Oil Co., preparatory
to drilling. In addition, gas fields were discovered in Akkas region, in the same area. No more details were
available.
Late in December, Indias Oil & Natural Gas
Corp. announced that it will spend $85.67 million to explore Iraqs Abu Khema oil field. An MOU was
signed in November; a PSA will be signed later in 2001.
Drilling / development. Only 14 wells were
drilled in 2000, and the number will not go much higher, until the UN approves several contracts pending with
foreign drillers. Any relaxation of sanctions will spur drilling activities and increase the number of wells
drilled substantially.
The UN last December approved a contract with Russian
firm Zarubezhneft to drill 45 wells in the northern fields. In April, Tatneft, a Russian oil company, received
UN approval to drill 33 wells in the northern fields of Kirkuk, Saddam, and Bai Hassan. These drilling
activities are designed to prevent further deterioration in these fields. Tatneft is also negotiating to
possibly drill five horizontal wells in Saddam field.
An MOU was signed between Algerias Sonatrach, an
Indian group and Iraq to develop Tuba oil field, at an estimated cost of $500 million. Tuba could produce up
to 180,000 bopd.
Production. Iraqi output increased 4.2%, to
reach 2.571 million bopd. However, it is expected to decline this year because of the temporary halt in
production during December and June.
Iraqi production went back to normal in April 2000
after three months of decline caused by Iraqs demand, that companies pay a surcharge that the UN did not
agree with. Output reached 2.85 million bopd that month, versus 2.6 million bopd in March.
Under Phase 9, which ended in June, Iraqi oil exports
through the UN oil-for-food program reached 293 million bbl, at a value of $5.638 billion (or 6.668 billion
Euros). Compared to Phase 8, Iraqi oil exports declined 22%, and revenues declined 41% in Phase 9. Iraqi
officials announced recently that Iraqs oil reserves increased 3 billion bbl in 2000, to reach 115
billion bbl.
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