Iraq Starts Pumping Oil Again

Turkey's Ceyhan oil terminal is seen in this June 22, 2003 file photo. Iraq began pumping fresh crude oil Wednesday, Aug. 13, 2003 through a pipeline to the Ceyhan terminal for the first time since the war, a Turkish oil official said.
Iraq began pumping crude oil from its northern oil fields Wednesday for the first time since the war — a milestone in the restoration of the country's oil production that augurs well for thirsty world markets.

Iraq sits atop the world's second-largest proven crude reserves, and oil exports are vital to its postwar reconstruction and the success of U.S. efforts to implant democracy in the country. Before the war halted Iraq's oil production, the country pumped around 2.1 million barrels a day, most of it for export.

Analysts said it was unclear how reliable the flow of oil from fields near the northern Iraqi city of Kirkuk might prove to be, but the reopening of the pipeline to Turkey's Mediterranean coast is a key step in rebuilding Iraq's oil industry.

Saboteurs and looters have dogged efforts to rehabilitate the 600-mile pipeline from Kirkuk to the Turkish city of Ceyhan. The lack of storage and export facilities forced the Iraqis to reinject much of the northern crude left over after refining for domestic use back into natural underground reservoirs.

"The export program has been stymied by unfortunate but continuing acts of sabotage. This is still the issue," said Michael Rothman, chief energy strategist at Merrill Lynch in New York. He said Iraqi oil exports were a paltry 300,000 barrels a day in July.

Iraq began exporting from its giant southern oil fields last month, sending fresh crude to ships waiting offshore in the Persian Gulf at the export terminal of Mina el-Bakr. These southern exports have been intermittent, however, due to power outages at the terminal and other interruptions.

Although Iraq's big northern fields also resumed production after the U.S.-British invasion, crude from the north was unavailable for export until now.

Delays in Iraqi exports have helped lift U.S. oil prices to well above $30 per barrel. Despite historically low inventories of crude in major importing countries, members of the Organization of Petroleum Exporting Countries agreed on July 31 to keep output steady — a decision that provided no comfort to consumers.

"At the end of the day, the oil coming out of Iraq is something the market needs right now," Rothman said.

Crude from Iraq's northern oil fields began pumping at around 4:30 p.m. local time, a Turkish oil official at the Ceyhan terminal said, speaking on condition of anonymity. Turkey's semiofficial Anatolia news agency quoted Energy Ministry officials as saying the first Iraqi oil reached the Mediterranean port at 9:30 p.m.

"In a couple of weeks, you should be able to start inviting tankers to come on down," said Peter Gignoux, head of the petroleum desk at Salomon Smith Barney in London.

Iraqi Oil Ministry officials could not confirm that crude was flowing into the pipeline.

Iraq was expected to pump between 300,000 and 400,000 barrels a day to Ceyhan. No oil tankers are currently booked to load there, and oil was expected to flow for about 10 days before any vessels would be sent for loading.

Ceyhan already holds about 500,000 barrels of Iraqi crude in storage and has room for around 7.5 million more barrels. Turkish energy officials said Iraq previously stopped pumping crude to Ceyhan on March 23.

The pipeline from Kirkuk is actually two parallel lines, one of which hasn't been used for years. The operable pipeline has a capacity of about 1 million barrels a day.

"It had been unclear whether oil would be flowing through there at all. Without it, you were bottling up half of Iraq's export capacity," said Jan Stuart, head of energy research at FIMAT USA, the New York brokerage unit of Societe Generale.

Iraq's oil exports resumed after the U.N. Security Council lifted sanctions on Iraq in May and recognized the U.S.-led coalition's authority over the country and its oil revenue.

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