Meters Cost Iraq Billions In Stolen Oil

Offices South Oil Company offices at ABOT
This story was written by Robert Riggs, chief investigative reporter for CBS station KTVT in Dallas.
Atop Iraq's al Basrah Oil Terminal, heavily armed anti-terrorism forces stand guard — while the theft of the century may be occurring right under their noses. Tankers berthed at the sprawling platform, located off Iraq's southern coast in the Persian Gulf, take on the oil that is the lifeblood of Iraq's war-torn economy.

Millions of dollars' worth of oil is stolen daily in Iraq because of the absence of oil meters, a basic tool for preventing corruption, according to estimates by classified CIA and State Department reports, the Iraq Study Group Report, a former consultant to a U.S. oil company and a former State Department adviser to Iraq's Oil Ministry.

A six-month investigation by KTVT found the annual thefts run into the billions of dollars and help fuel insurgents, sectarian militias and corrupt officials — as well as deprive the Iraqis of much-needed money to run their struggling government.

"I would say probably between 200,000 and 500,000 barrels a day is probably unaccounted for in Iraq," says Mikel Morris, who worked for the State Department's Iraq Reconstruction Management Organization (IRMO) in Baghdad. Depending on fluctuations in the price of oil, the thefts could be worth $20 million to $30 million per day.

A Houston-area petroleum engineer, Morris says Iraq's oil industry is wide-open to corruption because there are no working meters anywhere in the system to keep count of how many millions of barrels of oil Iraq produces or exports. "It's like a supermarket without a cashier. There is no metering. And there's no metering at the well heads either. There's no metering at any of the major pipeline junctions," he says.

KTVT obtained photographs taken last spring during an Iraqi inspection that picture rusted, broken meters on the al Basrah Oil Terminal, known as the ABOT.

The bulk of Iraq's crude oil exports, which provided 94 percent of Iraq's $28 billion budget last year, are pumped into tankers at the terminal. The ABOT's oil meters have been inoperable since the U.S. invasion nearly four years ago, according to the U.S. Army Corps of Engineers, a former senior oil consultant for IRMO, statements by Iraqi officials and reports by a United Nations monitoring group.

Morris and other sources familiar with operations at the ABOT suspect that the inoperable meters allow corrupt officials to overload tankers with oil that is then sold on the black market. Intelligence reports warn that the profits from smuggled oil and petroleum products help fuel the insurgency in Iraq, though estimates of the losses vary widely.

A recent report to the Congressional leadership by the Government Accountability Office (GAO) also attributed the losses of Iraqi petroleum products to insurgents and underscored the absence of working meters. "According to State Department officials and reports, about 10 percent to 30 percent of refined fuels is diverted to the black market or is smuggled out of Iraq and sold for a profit. According to U.S. Embassy documents, the insurgency has been partly funded by corrupt activities within Iraq and from skimming profits from black marketers. In addition, Iraq lacks fully functioning meters to measure oil production and exports."