Information indicating that what was thought to be a huge minefield northwest of Kuwait--in the area where the US XVIII Airborne Corps would operate--was actually ground scarring from extensive oil exploration.

Is that the maximum output of 1.6 Mbarrels for Iraq that they can output? Can't they go as high as more than 3MBarrels? Since there is so much politically unstable Iraq is..shouldn't capitalize on pumping out as much as possible?

Iraq could eventually bring it's production to very high levels (perhaps as high as 10m bpd)

Among other challenges in maintaining, let alone increasing, oil production capacity, were Iraq's battle with "water cut" (damaging intrusion of water into oil reservoirs) especially in the south.

U.N. oil experts reportedly have estimated that some reservoirs in southern Iraq have been so badly managed that their ultimate recovery rates might be only 15%-25%, well below the 35%-60% usually seen in the oil industry.

Monday's price decline came after a port agent at Iraq's key southern port of Basra denied earlier reports that pipeline attacks had brought Iraqi exports to a complete halt.

The port is "fully operational," the port agent told Dow Jones Newswires, with crude flows averaging 60,000 barrels an hour, or 1.4 million barrels a day. Until recently, Iraq had been exporting about 1.8 million barrels daily.

The agent said that the two main pipelines that carry crude from southern fields to the port were fully functional and that tankers were loading at the port.

The pumping rate at Basra had been averaging about 72,000 barrels an hour but Monday's slightly reduced rate could be considered "normal," the agent said.

Confusion about the status of exports had stemmed from an attack on an another pipeline in the area, he said.

"The only two pipelines we are concerned with in terms of exports are the 42 (inch) and the 48 (inch) pipelines. There was an attack on a 47 (inch) pipeline at the weekend, but we are not even sure where the pipeline goes. It does not impact exports at Basra though," he said.

Oil exports, which have been falling for days because of a string of insurgent attacks, came to a complete stop from southern pipelines, which account for 90 percent of Iraq's exports, after an explosion Sunday.

Two senior officials of the South Oil Co., speaking Monday on condition of anonymity, said the southern lines were not likely to resume operations for at least a week. Iraq's other export avenue, a northern pipeline to the Turkish Mediterranean port of Ceyhan, also carried no oil Monday, according to an oil official in Ceyhan.

Basra Gov. Hassan al-Rashid confirmed that oil exports in the south were halted completely Monday. "Yes, they are stopped," he told The Associated Press.

Associated Press Reports

Last modified Monday, August 30, 2004 3:01 PM PDT



Attacks Halt Oil Exports From South Iraq

By ABBAS FAYADH

BASRA, Iraq - Senior Iraqi oil officials said crude exports from southern Iraq were halted Monday because of attacks on pipelines, although some U.S.-based traders said other reports suggested that supplies were still flowing.

As a result, oil prices plunged by nearly $1 a barrel at the New York Mercantile Exchange.

Two senior officials of the South Oil Co., speaking Monday on condition of anonymity, said the southern pipelines were not likely to resume operations for at least a week. Iraq's other export avenue, a northern pipeline to the Turkish Mediterranean port of Ceyhan, also carried no oil Monday, according to an oil official in Ceyhan. Those lines have also been repeatedly attacked.

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Basra Gov. Hassan al-Rashid confirmed that oil exports in the south were halted completely Monday. "Yes, they are stopped," he told The Associated Press.

Al-Rashid said the country was losing $70 million a day because of the attacks on pipelines and oil fields. Oil flows out of Iraq's southern pipelines account for 90 percent of the nation's exports.

The latest strikes, which hit five pipelines linked to the southern Rumeila oil fields on Sunday, immediately shut down the Zubayr 1 pumping station, forcing officials to use reserves from storage tanks to keep exports flowing for several hours. The reserves ran out late Sunday, the South Oil Co. official said.

Energy traders in New York attempting to digest conflicting reports about Iraqi oil exports said Monday that what was most significant, perhaps, was the market's initially muted reaction to news that exports had stopped. Rather than shooting up, prices only inched higher, suggesting that broader supply fears have abated somewhat.

Regardless of just how badly the oil flow has been hindered, "two weeks ago, with that news, we would have been up more than $1," said Tom Bentz, a trader at BNP Paribas Futures in New York. "The tide has definitely turned."

The job of guarding oil pipelines primarily falls to the U.S.-trained Iraqi infrastructure protection service, although some U.S. soldiers continue to be to be involved. But with about 4,350 miles of pipelines crisscrossing the country, officials concede there are many places for saboteurs to strike.

Nevertheless, oil prices fell as traders continued a selloff amid easing fears that disruptions in Iraq, Russia or Venezuela could cause a supply squeeze. October contracts for light sweet crude fell by 90 cents to $42.28 on Nymex _ well below peaks of over $48 a barrel in mid-August.