Thursday, July 7, 2016

Satellite photos show Islamic State installing hundreds of makeshift oil refineries to offset losses from airstrikes

Smoke rises from an oil refinery in Baiji, Iraq, in October 2015. (Reuters)

With its refineries mostly destroyed and its tanker fleet under constant attack, the Islamic State is increasingly turning to low-tech alternatives for processing oil, a vital source of revenue for the terrorist group, new satellite images reveal.

Aerial photos taken near the northern Iraqi city of Mosul show scores of tiny, makeshift refineries popping up in oil fields controlled by the Islamic State, evidence that the jihadists are finding workarounds after losing much of their oil infrastructure to airstrikes.

The micro-refineries — sometimes called “teapots” — consist of little more than a ditch or pit for storing crude and a portable metal furnace used to distill raw petroleum into fuel. Thousands of such systems have long been in operation in the Islamic State’s Syrian strongholds, but now they’re sprouting up around the more established, though heavily damaged, Iraqi oil fields, said Omar Lamrani, a senior analyst for Stratfor, a private, Texas-based intelligence company.

“In a single oil field there can be hundreds of these makeshift operations,” said Lamrani, citing aerial imagery showing a constellation of tiny furnaces around a Mosul field that was mostly just sand a year ago. “It’s not the ideal way to do it, so their revenue is going down. But it still works.” The images were provided to The Washington Post by Stratfor and AllSource Analysis, a Colorado firm that specializes in geospatial research.

The tiny refineries are partly offsetting huge losses in income resulting from the disruption of traditional oil production in northern Iraqi fields controlled by the Islamic State since mid-2014. After capturing the facilities, the group’s leaders initially attempted to run them as businesses, retaining enough workers to keep the refineries operating and hauling the finished products by tanker truck to independent dealers in Turkey, Syria and Iraq’s Kurdish provinces, U.S. officials say.

At its peak, the Islamic State’s oil operations were netting an estimated $50 million a month. But the group’s oil income has plummeted in recent months, through a combination of poor management and a steady drumbeat of airstrikes that have targeted refineries and storage depots as well as tanker convoys.

The proliferation of micro-refineries is the latest sign of strain in the group’s self-declared caliphate, which has lost half its territorial holdings in Iraq since late 2014. At the same time, the use of low-tech alternatives also reflects a certain resilience by an organization that also depends on self-generated oil to run its military operations and electric generators, Lamrani said. Stratfor estimates that oil contributed about $20 million a month to the Islamic State's coffers as recently as March, with much of the petroleum coming from makeshift facilities.

There are many drawbacks to the system. The small furnaces, which heat raw petroleum to a high temperature and then capture and cool the vapors to create gasoline, produce thick clouds of black smoke and leave pools of toxic byproducts on the surface. But because they are small and scattered, the "teapot" refineries are harder to destroy from the air. And any that are destroyed can be easily and cheaply replaced, oil industry experts say.

“This is very inefficient, dirty and creates lots of waste,” said Paul Bommer, a professor of petroleum engineering at the University of Texas at Austin. And yet, he said, “it is a way to make small amounts of product at isolated locations, which I suppose could make the sites harder to find.”

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