An international agency says Iraq's decrepit oil industry requires $5 billion of investment if it is to more than double oil production by 2010. Efforts are being made to rehabilitate Iraq's vital oil industry.
Fatih Birol is the chief economist for the Paris-based International Energy Agency. He told a conference in Washington Wednesday that at least $5 billion will be needed to boost Iraq's production capacity to four million barrels a day. Currently Iraq is producing less than 1.5 million barrels a day.
U.S. officials would like Iraqi production to recover to pre-2003 war levels of 2.5 million barrels sometime next year. Oil exports have resumed but only from Iraq's southern fields. Pipeline problems and sabotage continue to hinder restoration of exports north to Turkey.
Mr. Birol says his cost figures are conditional, among other things, on peace in the country and the establishment of a provisional government.
"And second, how is the Iraqi oil sector going to be restructured," he asked. "And what is the role of SOMO [State Oil Marketing Organization]? And what will be done about the contracts that were done before the war? And finally what will be the Iraqi policies towards OPEC and OPEC policies toward Iraq?"
At the same Center for Strategic and International Studies conference, oil analyst Robert Ebel said the Iraqi oil fields are in a deplorable condition.
"The fields have been damaged by over-production, water flooding, lack of investment," he said. "And I feel if we return to the 2.5 mbd [million barrels per day] and try to maintain that for a while, we risk further damaging the fields and that damage would lead to higher costs."
Mindful that Iraq has the world's second largest oil reserves and a low cost of production, economist Lee Hoskins, a former Federal Reserve Board governor, wants the American occupiers to assure that the Iraqi people gain title to their country's vast oil wealth. Mr. Hoskins wants ownership certificates issued to every Iraqi.
"What I'm trying to get at here is that there is probably $100 billion in terms of oil reserves in the ground right now," he said. "That's capital that can't be used if we wait to pump it out. If we assign rights based on international oil companies bidding on, say, five or six pools of oil. And simply issuing stock to everyone over the age of 18, those people can then sell it [the stock] to Merrill Lynch [or any brokerage business] or anyone they want, or keep it and earn a dividend."
Mr. Hoskins said his idea will be difficult to implement and is certain to be opposed by those who want Iraq's state-owned oil company to retain its dominant and monopolistic status.
