LONDON: The present state of Iraq's collapsing oil sector, its economic lifeline, is bleak and its future looks far worse, despairing officials say. Another damaging oil attack this week, the prospect of British troops handing over the oil city of Basra and virtual civil war have all but crushed hope for Iraqi officials battling to keep exports flowing to world markets.
“One thing is sure. The worst is yet to come,” an Iraqi oil industry source said by telephone from Baghdad.
His task is made harder still by gross mismanagement at the oil ministry and chronic underinvestment in the vital sector -- already neglected for decades due to sanctions and wars.
“There is no line of authority at the oil ministry,” said an oil official in the capital. “We are crippled. We have the resources and the finances and we are still failing.”
With Baghdad in chaos, technocrats fear the oil producing regions in the Shia south and in the north near Kurdistan may seize control of exports and effectively dismember the country that holds the world's third biggest oil reserves.
“Our country may be dismantled -- farewell to central government,” the oil source said. “This is the danger.”
Salvation, in the form of an eagerly-awaited oil law designed to unify the country and lure foreign investment, is unlikely to arrive by the end of the year.
Control of the oilfields is dividing Iraq's three main communities, the Sunnis, Shias and ethnic Kurds. Sunnis fear autonomous deals by Shias in the south and Kurds in the north will cut them out of Iraq's oil wealth.
They, along with the Kurds and Turkmen, are disputing the status of Kirkuk and its giant oilfield. A December 2007 referendum will decide whether Kirkuk city and the surrounding area should be controlled by the Kurdistan regional government.
“That's the real flashpoint,” said Peter Khalil of Eurasia Group. “The Kurds have de facto taken control of Kirkuk.”
Whoever does lay claim to Kirkuk will inherit an 80-year-old oilfield that pumped 800,000 bpd or nearly a third of Iraq's output under Saddam Hussein.
Rates have slowed to a trickle since the US-led invasion in 2003 as relentless sabotage along the northern export pipeline to Turkey has kept exports mostly idle.
Though plagued by factional fighting, mainly Shia Basra has largely escaped the sectarian violence.—Reuters
