IRAQ - Logistics.

For it to become one of the biggest oil exporters, Iraq will require huge investment in logistics. These will have to include mega terminals on Iraq's Persian Gulf coast, on the east Mediterranean coast in addition to Ceyhan in Turkey, and on the Red Sea. Baghdad will need US help in getting the Saudi government to return to Iraq ownership of a major crude oil pipeline passing through Saudi territory and ending just north of Yanbu', on the Red Sea, as well as ownership of its terminal.

Before the war, conditions at Iraq's existing storage, pipelines, terminals and loading facilities had deteriorated due to lack of equipment and spare parts. Apart from problems faced by shippers at the Mina al-Bakr and Khor al-Amaya oil terminals, offtakers had to pay directly to the Iraqi authorities port charges of up to $18,000 worth of euros per loading.

Iraq now does have the capacity to export up to 3.5m b/d of crude oil.The Kirkuk-Ceyhan pipeline was expanded from 1.1m to 1.6m b/d in 2001 with the re-opening of a parallel line. Repair of two berths at the deep-water Khor al-Amaya terminal in the Gulf was done in 2001.

Under Saddam, Baghdad had been planning to expand the capacity of Mina al-Bakr and Khor al-Amaya terminals to 3.2m b/d, as a minimum, but work on this was to begin after the UN sanctions. It was also planning to have a large fleet of crude oil and products tankers. Saddam's government said in 2000 it intended to lay two to three 42/48-inch crude oil pipelines (120-130 km) between new storage depots and a rebuilt Faw terminal and complete a second north-south strategic pipeline. It was said the latter project required some 230 km of 42-inch line and expansion of the first pipeline's four pumping stations (see background in Vol. 52, No. 19).

The 18-42-inch strategic pipeline system, built in the 1970s and expanded with a 42-48-inch twin line in the early 1990s, should have a capacity of 1.4m b/d to pump crude oils from Rumaila in the south to the northern pipeline system or vice-versa, giving Iraq flexibility to shift exports either way.

This line's length is 760 km, consisting of 655 km from the Rumaila fields to Haditha in the north and 105 km from Rumaila to Faw. Storage facilities at Faw are linked by marine pipelines to Mina al-Bakr and Khor al-Amaya. The line's main pump station, K-3 at Haditha, and three intermediate stations were nearly destroyed in the 1991 war. K-3 was repaired and put in operation in November 1991. The other stations were repaired in 1992. But the whole system needed modernisation.

It was reported recently the Basra oil terminal finally could work at full speed. This giant H-shaped tanker loading platform is one of Iraq's most important pieces of infrastructure, rebuilt with US funds. All four of its berths now are in operation for the first time in many years.

Built in 1974, the terminal had suffered from war damage and neglect for decades. After the ouster of Saddam's regime in 2003, US inspectors found the facility capable of only limited operations, due to the dilapidated condition of crude oil loading arms and missing and damaged auxiliary equipment. Rebuilding began in early 2004. This spring, the US Special Inspector General (SIGIR) for Iraq sent a team to assess the terminal's rebuilding. They judged it a qualified success. But inspectors also found that its lifeboat deployment system to be incomplete. SIGIR says to facility will not be able to approach its 3m b/d capacity until repairs are made on the leaks and patches of the 48-inch sub-sea pipeline tied to the terminal.

The Iraqi Oil Tankers Co. (IOTC), a unit of the Oil Ministry, has received a $20m loan from the government to purchase two medium-range (MR) tankers. Reuters on May 4 quoted IOTC's commercial director, Karim Jabar Hassan, as saying: "As you know we are slowly trying to rebuild our fleet, and this year we are looking to get two MR tankers to help with bunker fuel supply at Iraqi ports".

IOTC was set up in 1972. At one time it had about 20 tankers, including 15 Aframax and Suezmax tankers and five smaller oil product carriers. Now IOTC is looking to help supply about 60,000 tons/month of marine fuel to various ports in Iraq, helping refuel ships which carry its crude oil exports to foreign refiners and import commodities such as wheat and edible oils. Hassan said: "This is the first phase, after this we will look at expanding into transporting crude oil".

IOTC, ravaged by the Iran-Iraq war and the 1991 Gulf war, has struggled to recover and sees its rebuilding plans to take at least five years. Hassan said: "The government told us to come up with three proposals, and we have got that now, so it is up to them to decide. In the short term we are looking to purchase...a total of 10 Suezmaxes and Aframaxes by (2010-2012)". He said the expansion would have to be financed by government loans and JVs with foreign investors.

IOTC has fielded proposed JVs with Malaysian MMM, Norway's StenaBulk, and a US-based shipping firm to help in its broader plans to transport crude oil. But the turmoil and violence in Iraq has made foreign firms wary and agreements difficult to clinch. MMM signed an agreement in 2004 with IOTC to set the Iraqi Malaysia Oil Tankers Co. in Dubai, but the deal has stalled because of the volatile political situation in Iraq. Hassan said: "Yes, we have a problem now that our government is still not stable, so we have to wait for some certainty and stability, we hope this can be sorted out soon".

The Iraq-Syria pipeline, which until late March 2003 pumped Kirkuk crude oil from Haditha to Syria's Mediterranean terminal at Banias, was re-opened in late 2000 after repairs. It was not approved by the UN, and from late 2000 the US kept pressing Syria to stop it.

The pipeline was on March 27, 2003, ordered shut from Haditha by then US Defence Secretary Rumsfeld, who warned Syria to stop helping Saddam against US forces.