- The Washington Times - Thursday, June 17, 2004

LONDON (AP) — Iraq could resume exporting limited amounts of oil today, analysts said, with repair crews nearing completion of work on the smaller of two pipelines crippled in a sabotage attack.

If no more attacks occur, Iraq could restore and maintain normal shipments of at least 1.5 million barrels a day from its southern oil fields by next week, the analysts said yesterday.

An attack on the two southern pipelines forced Iraq to suspend all crude shipments from the Persian Gulf on Wednesday. The explosion north of the coastal town of Faw was the second such attack in three days.

The disruption in exports deprives Iraq of its main source of income and comes as Iraqis prepare to take over political power from the U.S.-led coalition on June 30. The outage prompted the Organization of Petroleum Exporting Countries to signal plans to boost output to keep crude prices from rising.

The attack damaged a 23-foot section of the two pipelines that carry crude from some of Iraq’s largest fields to tankers waiting at offshore terminals.

Repairs on the smaller, 42-inch diameter pipeline could be finished by today, said Paul Horsnell of Barclays Capital in London. Iraq could then begin exporting 600,000-to-700,000 barrels a day, he said.

Repairs on the larger, 48-inch pipeline could be completed by the middle of next week, he said.

Edward Morse of HETCO, a New York energy trading firm, expected partial exports of 450,000 to 500,000 barrels a day to resume by this weekend. A similar volume of crude should begin flowing “in a few days” from oil fields in northern Iraq to the Mediterranean port of Ceyhan, Turkey.

Iraq’s northern pipeline has operated only rarely since the toppling of Saddam Hussein, because of attacks by saboteurs, and the southern pipeline system has become the country’s main economic artery.

If Iraq can restart exports through both systems, it could begin shipping about 1 million barrels this weekend, Mr. Morse said.

A senior Iraqi Oil Ministry source said oil would start flowing at normal volumes as soon as the pipelines are repaired.

However, the risk is high that saboteurs might intensify their attacks on Iraqi oil facilities ahead of June 30. If so, authorities might be forced again to reduce or halt exports.

Mr. Morse estimates the chances of another such attack at 90 percent.

Iraq has the world’s second-largest oil reserves, and earnings from crude exports are essential to the country’s reconstruction and political stability.

However, years of war, U.N. sanctions and mismanagement have left Iraq with dilapidated and obsolete oil facilities, and Iraqis have failed to restore crude exports to prewar levels of more than 2 million barrels a day.

On futures markets, contracts of U.S. light crude for July delivery traded 3 cents higher at $37.35 per barrel in New York. August contracts of North Sea Brent crude rose 24 cents at $35.44 in London.

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