Iraq to resume north oil flows

Iraq is preparing to resume oil exports through Turkey in a few weeks through a new pipeline built in the midst of violence to help handle the flows, Oil Minister Hussain al-Shahristani said on Tuesday.

Crews have finished testing a 500,000-barrel per day pipeline covering a section of the northern export route and a special security force numbering thousands is being deployed to guard the network, Shahristani told Reuters.

"We have executed construction in a region practically on fire and we now have a bigger margin for manoeuvre as far as countering sabotage," Shahristani said in an interview.

"The tests have been successful and the new security force is a different breed from the corrupt one of old," he said on a visit to Damascus as a member of an Iraqi delegation negotiating improving ties with the Syrian government.

The pipeline runs from the oil centre of Kirkuk to the refining centre of Baiji, around 100 km (62 miles) southeast. Exports are initially planned at 300,000 bpd, rising to 500,000 bpd, the minister said.

Regular northern flows would raise Iraqi exports, which averaged 1.7-1.8 million bpd in July, to 2.2 million bpd. This is still less than 1990 levels, when crushing United Nations sanctions were imposed on Iraq after it invaded Kuwait.

Sabotage attacks averaging two a week against northern export pipelines have all but stopped Iraq's oil flows through Turkey's Ceyhan port after the 2003 U.S. invasion that removed Saddam Hussein from power. Numerous attempts since to ensure smooth flows have failed.

Shahristani blamed the sabotage on rebels fighting the U.S.-backed government and al Qaeda operatives.

In the more stable south, Shahristani said Iraq is finalising talks to build a 100,000 bpd export pipeline from Basra to Iran's Abadan port.

The project, which is scheduled to take a year to complete, has been delayed but meetings with the Iranian side are due to resume this month.

Most of Iraq's oil exports currently originate from the south and are exported by sea from the Basra terminal, which is operating at full capacity.

"Oil will be sold to Iran at market prices. We don't give discounts based on political considerations as Saddam did," said Shahristani, who was a leading member of the opposition to the former Iraqi president.

INSTABILITY

The former nuclear scientist was imprisoned for more than a decade under Baath Party rule for his advocacy of human rights and association with Mohammad Baqer al-Sadr, a legendary Shi'ite theologian executed by the Saddam government in 1980.

Since returning to Iraq, Shahristani has advocated negotiating a withdrawal of U.S.-led troops from Iraq and says an American pullout would not affect the oil sector.

"The presence of foreign forces have not prevented kidnappings or sabotage. At the oil ministry we face smuggling mafias, daily murders and abductions, but this has not stopped us from producing," he said.

The latest senior oil official to be kidnapped was Abdul Jabbar al-Wagga, a deputy minister and the highest ranking Sunni at the ministry. Wagga was taken from a fortified government compound last week.

Shahristani said despite the instability Iraq's divided politicians realise it is not in their interest to cripple the oil sector.

He said he expected parliament to pass a law next month to regulate development of Iraq's 112 billion barrels of reserves, despite internal opposition to production sharing agreements (PSAs) favoured by international oil companies.

"Several parliamentary blocs want to add a clause banning PSAs, although these deals are common even in highly nationalistic Syria," Shahristani said.

"We at the ministry are not that enthusiastic about PSAs, especially that we have the finances and ability to raise production from existing fields," he said.

The new law, Shahristani said, will stipulate a review of all oil and gas deals struck by Saddam and by the Kurdistan government to "guarantee total national control and the highest return for Iraq."

"Any contract that contradicts this has to be redrawn," he said. "The oil law is not as contentious as those who oppose Iraqi democracy imagine."

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