Gulf-Times (Qatar): Iraq oil industry reels from abductions of top officials

EXTRACT: Executives from Royal Dutch Shell have been in talks with Iraq officials this year about exploiting gas reserves.

Published: Sunday, 26 August, 2007, 06:19 AM Doha Time
 
AMMAN: On first blush, the outlook for Iraq’s petroleum industry looks brighter than at any point since the US-led invasion four years ago, with exports hitting a three-year high in July and foreign oil majors jockeying for lucrative slices of its energy resources.

Yet the surprisingly resilient oil business in Iraq, home to the world’s third biggest oil reserves, is now tottering as many of the country’s respected veteran oil officials are kidnapped, murdered or seek sanctuary beyond its borders.

Nearly two-thirds of Iraq’s top 100 managers, including geologists and engineers, in Iraq’s oil ministry and its affiliate companies have been murdered or left their jobs since the fall of Saddam Hussain’s regime in 2003, according to current and former Iraqi oil officials.

Thamer al-Ghadhban, oil adviser to Prime Minister Nouri al-Maliki and a former oil minister, says the oil ministry hasn’t been able to fill any of these top positions because of the lack of qualified staff.

The abduction last week of five top Iraqi oil officials, including the deputy oil minister, underscores the dangers and violence undermining state oil operations and, in turn, government oil revenues and finances.

Iraqi Finance Minister Bayan Jabor said a week ago that he expected the government to log a $4bn deficit this year, in good measure because of attacks on oil facilities and staff that have hurt oil output and exports.

Ghadhban told Dow Jones Newswires the abduction last week of Deputy Oil Minister Abdul Jabar al-Wagaa, one of the highest ranking oil officials to go missing since the fall of Saddam, is a serious blow to the country’s oil sector.

Wagaa, appointed in 2004 as a top assistant to Iraq’s oil minister, may have fallen victim to sectarianism. He was one of the highest ranking Sunnis – from a prominent tribe, the Jibouri – in an oil ministry that some analysts believe is being increasingly staffed with Shia.

“Definitely Wagaa’s kidnapping would have very bad consequences on the country’s crude oil production and exports,” Ghadhban said. “The incident would also have bad effects on the psychology of other oil staff.”

Wagaa and four officials from the State Oil Marketing Organisation (SOMO), were abducted last Tuesday from their closely guarded residential complex in East Baghdad by unknown gunmen in military-style uniforms and vehicles.

SOMO is crucial to Iraq’s oil earnings because it markets and sells the majority of its output to the global energy markets. Three of the four high-ranking SOMO officials abducted had responsibilities that included managing crude sales and exports to Europe.

SOMO has just a handful of English-speaking executives remaining, versus dozens in 2003, because of staff departures and personnel who have been murdered, government officials say.

“It is a large campaign by terrorists to rid the country of its highly talented oil know-how, whether through kidnapping, killing or even forcing them to flee the country,” former Oil Minister Issam al-Chalabi said.

The oil ministry estimates that nearly 300 Iraqi oil workers were killed last year because of militant attacks.

Wagaa was in charge of the oil ministry’s exploration operations and oversaw the North and South Oil Companies, the state firms in charge of virtually all Iraq’s oil and gas production. Wagaa, an oil ministry veteran of 30 years, also managed a joint programme with foreign oil companies that trains Iraqi oil officials and workers.

Some of the remaining managers are said to be pleading with foreign oil companies for advisory roles outside the country in places like Dubai and Amman, Jordan.

Finding skilled engineers and managers to put Iraq’s dilapidated oil sector back on its feet is almost impossible because of the brazen and deadly attacks by militants and insurgents.

Work at Iraq’s State Company for Oil Projects, which supervises oil field construction efforts, has dried up because of attacks on executives, including director general Muthanna al-Badri, officials say.

Al-Badri remains missing since he was kidnapped last year. In addition to attacks on pipelines and other infrastructure, efforts to restart Iraq’s rich northern oil fields have been stymied since the kidnapping last year of Adel Kazzaz, long-time head of the state-run North Oil Co He is also missing.

The brain drain has also hurt the drawing up of the regulatory framework of Iraq’s long-delayed oil law that will govern the development of the country’s energy resources, Kurdish Oil Minister Ashti Hawrami told Dow Jones Newswires.

Officials and analysts say the dwindling numbers of well-qualified Iraqi oil staff is likely to slow eventual contract negotiations between the government and foreign energy companies, even once Iraq’s long-delayed hydrocarbons law is passed.

“It will be difficult getting contract discussions going for all the various companies looking to get in because of the lack of good top-level staff in the country,” said a US official in Baghdad.

Executives from Royal Dutch Shell have been in talks with Iraq officials this year about exploiting gas reserves. Total and Chevron Corp recently agreed a services pact to develop at least two big oil fields in the country in the coming years.

Representatives for all the companies refused to comment on the matter.

There is also concern violence against energy officials and installations could get worse in Iraq’s oil-rich south as Shia factions there battle each other over political turf amid the gradual withdrawal of British forces from Basra, Iraq’s second biggest city in the south and a giant oil export hub. The region is dotted with hundreds of oil wells open to attacks.

Iraq last month led the biggest gain in oil output by the Organisation of Petroleum Exporting Countries in more than a year, as its exports jumped to 1.7mn bpd.
That, however, was due a burst of sales from crude in storage tanks in Turkey that is unlikely to be repeated anytime soon.

Iraq crude exports in the first half of this year were 200,000 bpd below the government’s targeted level of 1.7mn bpd. – Dow Jones Newswires

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