Monday, June 21, 2010

Iraq has no budget to develop oil industry

By Qassim Khidhir
The Kurdish Globe

Rusty oil pipelines in "urgent" need of maintenance

More than 1 billion cubic feet of gas is wasted every day in Iraq through uncontrolled flaring.

Director of Planning of Iraqi North Oil Company, Dr. Hussein Gulam, said the Iraqi oil industry is suffering technical problems and its budget is not substantial enough to develop its oil industry.

''The pipelines are very old and rusty; they need to be repaired," noted Gulam, who added that 50 kilometres of the Iraq-Turkey crude oil pipeline need urgent renovation due to rust. That pipeline, which also known as the Kirkuk-Ceyhan oil pipeline, is a 600-mile (970-km)-long pipeline. It is Iraq>s largest crude oil export line, and was built in the late of 1970s.

In 1979, the oil production in northern Iraq (Kirkuk mainly) reached more than 1 million barrels a day. However, North Oil Company can now produce only 670, 000 barrels a day. In the past 20 years, Iraq's oil and gas industry has suffered a huge crisis due to wars and the UN embargo on the country.

According to the Iraqi Oil Ministry, more than 1 billion cubic feet of gas is wasted in Iraq through uncontrolled flaring daily due to lack of modern equipment and proper engineering. Reports say that Iraq loses US$50 every second as a result.

In Kirkuk alone, 150 million cubic feet of gas is flared daily, said Director General of the Northern Gas Company (Kirkuk), Dr. Huner Najeeb Hassan, to "The Kurdish Globe." "In other words, we can say Iraq loses $700,000-$800,000 every day only in Kirkuk because of gas flaring," said Dr. Hassan. He said he needs no less than US$200 million in order to control the Kirkuk gas flare.

The North Gas Company (Kirkuk) is currently producing dry sales gas, which is used in electricity generation stations as well as many other industrial factories as fuel gas, in addition to its use as raw material in petrochemical industries and fertilizers. LPG, or cooking gas, is used for domestic uses and export. Natural gasoline is used as fuel (after improving its specification) or injected with raw oil to improve specification. And sulphur is used as raw material in many local industries and for export.

In Kirkuk there is only one refinery; it is very small, old, and produces bad quality gasoline. Dr. Hassan has pointed out that there is a plan to build a huge refinery in Kirkuk that can produce 150,000 refined barrels of oil, petrol, gasoline, and different kinds of engine oil as well as asphalt. The refinery will cost US$1.5 billion.

At present, the North Gas Company produces approximately 400-million cubic feet of gas a day. The majority is used for producing electricity in the power plants. Seventy percent of Iraqi oil is located in Basra province, south of Iraq, and 60 percent of the Iraqi gas is also situated in Basra province.

According to the "Oil and Gas Journal," Iraq contains 110-trillion cubic feet (Tcf) of proven natural gas reserves, along with roughly 150 Tcf in probable reserves. About 70 percent of Iraq>s natural gas reserves are associated (i.e., natural gas produced in conjunction with oil), with the rest made up of nonassociated gas (20 percent) and dome gas (10 percent).

Regarding Iraqi Kurdistan Region, two weeks ago the Minister of Natural Resources of the Kurdistan Regional Government said Kurdistan Region is estimated to possess 6-8 trillion cubic meters of natural gas reserves.

Ashti Hawrami, the Natural Resources Minister, remarked that Kurdistan Region can provide natural gas to make the Nabucco pipeline feasible. «We can provide 14 or 15 billion cubic meters to make the project work,» said Hawrami.

Despite tensions between Kurdistan Region and the country>s central government over who should shoulder the cost of extracting the gas, the minister said he is optimistic that the issue would be resolved quickly.

Last week, a number of Netherlands and German companies active in oil and gas arrived in Erbil city. During a workshop with Iraqi officials from the Iraqi Oil Ministry and the North and South Oil and Gas Company, the Netherlands and German companies discussed business opportunities.

Ambassador of the Netherlands to Baghdad, Peter Van Leeuwen, told "The Kurdish Globe" that there are good business and investment opportunities for Netherlands companies in Iraq. Leeuwen has urged Iraqi politicians to focus on economic development, building the infrastructure, and improving the security situation in the middle and south of the country. The ambassador mentioned that next September a delegation of Netherlands companies specialized in the water sector (sanitation, irrigation) will visit Kurdistan Region.

The Netherlands Honour Consul in Erbil city, Salah Khidhir, said currently 15 Netherlands companies are working in Kurdistan Region.

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