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Royal Dutch Shell Plc .com: Iraq to resume oil exports from north

From The Financial Times
By Carola Hoyos in London

Published: June 28 2006 03:00 | Last updated: June 28 2006 03:00

Iraq was yesterday poised to restart its critical northern oil exports after a nine-month interruption caused by pipeline sabotage.

The country’s marketing company this week sold several batches of oil from its storage tanks at the Turkish port of Ceyhan, the end point of its northern export route, freeing up room for new supplies to be pumped from the fields.

Though shipping brokers were optimistic, they cautioned that the 600-mile pipeline was still vulnerable to attack and that the flow could prove temporary.

Since 2003, sabotage in the north has forced Iraq to rely almost exclusively on exports from the main Basra terminal in the south. The Energy Information Agency, the statistical arm of the US department of energy, calculates that Iraq’s energy infrastructure suffered 282 attacks between April 2003 and October 2005.

The special inspector general for Iraq reconstruction warned recently that not “enough had been done to secure the industry, which is Iraq’s only major domestic source of revenue, needed to rebuild the devastated country”.

Exports from Basra have recently averaged about 1m to 1.5m barrels a day. This compares with total Iraqi exports of about 2m to 2.5m b/d before the US invasion. The US estimates the country lost about $90m (€71m, £49m) a month in revenue in 2005; that number is likely to grow this year if oil prices continue to rise.

Iraq needs at least $20bn in investment and help from international energy companies to quickly boost production from its fields. But even getting the country back to its peak production of 3.7m b/d in December 1979 will take a period of sustained calm and a more robust political and legal framework, energy executives warn.

So far no big international oil companies have been willing to take on significant projects in Iraq because of the danger to employees and the uncertainty surrounding the legal status of any deals.

Royal Dutch Shell and BP, Europe’s two biggest energy groups, however, recently completed studies of the data for some of Iraq’s biggest oil basins. Both companies are keen to improve their ties with Baghdad in the hopes of boosting their chances of getting lucrative contracts once the political and security situation on the ground improves.

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