IRAQ - Lack Of Equipment & Spare Parts.

Because of a lack of adequate equipment and spare parts, oilfields in the north and the south have been damaged in recent years. There is also a lack of demulsifiers, chemicals used to separate high salt content out of wet crude oils.

The technicians at both the South Oil Co. (SOC) and North Oil Co. (NOC) improvise in their work using unconventional methods. They maximise output mainly by relying on water injection, with production rising when demand is strong. At the Kirkuk oilfield in the north, wells are choked to reduce their flow when demand falls, while others are shut down. As output increases according to demand, shut down wells are brought back into production and reduced flows at choked wells are restored when exports rise. Rising water levels have forced NOC to shut down the wells at Kirkuk's Avanah and Baba domes. Most damage is in the southern oilfields.

A UN-appointed team of six experts, who visited Iraq last month and made a study of the fields' needs, are to issue their recommendations to the UN Security Council at the end of May. They are to propose ways to implement a cash reserve of 600m euros ($540m) for local oil expenses, including the purchase of advanced Western equipment, spare parts, emulsifiers and other chemicals, and labour/maintenance costs. The US wants the money to be paid against an Iraqi-itemised and US-verified list of expenses. Baghdad insists on direct control over the cash through its Central Bank.

In March 2000, UN Secretary-General Kofi Annan had warned in a report that Iraq's oil industry was deteriorating and that this would worsen unless more spare parts were allowed immediately into the country. This followed studies of the oilfields undertaken since 1999 by Saybolt International, a Dutch consulting firm which monitors the flow of Iraq's oil for the UN. After yet another survey in the following year commissioned by Annan, in June 2000 the Security Council increased the amount of money Baghdad could spend on its oil industry to $1.2 bn over a 12-month period. But most purchase contracts have been held up because of US objections over meterials which the Americans say could be used for military purposes.

Saybolt has warned about the fields since March 1999, when it said SOC's water injection programme to raise output had led to the watering out of 54 wells in the south. It said those wells were not likely to be rehabilitated. It said there was also irreparable damage to 20% of the oil reservoirs in the north. But the US has not been moved by such warnings.

The new Bush administration now indicates that the US would continue to take a hard look at Iraq's purchase requirements and orders until Baghdad allows UN weapons inspectors to return to the country. UN weapons inspections stopped when Baghdad had a confrontation with the US and UK in late 1998, with US and British attacks having failed to deter Saddam's regime. The regime now refuses to allow UN weapons inspections back.