Iraq Pipeline Attack to `Greatly Reduce' Oil Exports (Update3)
Sept. 4 (Bloomberg) -- An attack on an oil pipeline near the southern Iraqi city of Basra today will ``greatly reduce'' exports from the country's Persian Gulf oil terminals, said Jabbar al-Leaby, director-general of state-run South Oil Co.
``The attack on the pipeline, an act of sabotage, will greatly reduce exports,'' said al-Leaby in an interview from Basra, southern Iraq's regional capital. The full extent of the damage may not be known for days, he said.
Iraq exports 90 percent of its crude oil from the Persian Gulf ports of Basra and Khor al-Amaya. Repeated sabotage by opponents of the U.S.-led coalition and of the Iraqi government have interrupted exports, helping drive oil prices to a record.
Crude oil for October delivery rose 1.9 percent this week in New York to $43.99 a barrel, or 49 percent more than a year ago. The price slipped 7 cents a barrel yesterday as concern eased that shipments might be disrupted from Russia and Iraq.
Saboteurs today also set alight a secondary pipeline serving Kirkuk in the north, Agence France-Presse said, citing Northern Oil Co. security chief Ahmed Hassan Ghafif.
The sabotage follows Thursday's attack on a pipeline in northern Iraq, which halted shipments along the main export route from Kirkuk to the Turkish port of Ceyhan. The pipeline had been pumping 600,000 to 800,000 barrels a day, AFP said.
Achilles' Heel
``Clearly the insurgents, who are not one group of people, have identified the Iraqi oil facilities as the Achilles' Heel of the government, which they want to bring down,'' said Youssef Ibrahim, managing director of Dubai, United Arab Emirates-based Strategic Energy Investment Group.
The attack on the southern pipeline took place at about 8:30 a.m., AFP said, citing police colonel Nuri Jaafar Fayad. It damaged parallel pipes, one carrying oil to the Harithah electrical plant and another connecting the town of Nahr Omar to the Zubeir oil fields, AFP said.
Exports through Iraq's two southern terminals on the Persian Gulf weren't affected by the attack as of 9:00 a.m., said three local shipping agents who declined to be identified. Shipping agents handle tankers calling at the terminals.
Attacks Expected
Three vessels, the Namur, Crude Progress, and Guru Gobind Singh were loading at a combined rate of 90,000 barrels of oil an hour from the Basra and Khor al-Amaya terminals, more than yesterday's rate of 70,000 barrels of oil an hour, the agents said. Two other vessels, the Eco Africa and Hyundai Banner, were berthed at the terminals waiting to load, they said.
Iraqi exports through the southern oil terminals were at a rate equivalent to 1.9 million barrels a day on Thursday, close to maximum capacity, local shipping agents said.
Attacks on pipelines and oil sites will probably increase as more insurgents, some backed by Iraq's neighbors, try to bring down the government of Prime Minister Ayad Allawi, said Strategic Energy's Ibrahim.
Iraq relies on oil sales to pay the salaries of more than 1 million government employees. The country lost $1 billion in income as a result of sabotage to its oil facilities during the year to June, Prime Minister Allawi said that month.
Declining oil exports from Iraq, the Middle East's fifth- largest oil producer in July and the world's third-largest holder of oil reserves, helped push oil prices on the New York Mercantile Exchange to a record $49.40 a barrel on Aug. 20.
Oil exports from Iraq fell in August to the lowest in 10 months after a pipeline in the south was shut for about two weeks. Shiite Muslim militia had threatened to attack it.
`Feelings of Hopelessness'
``These attacks, which have been taking place for a year and a half, can't be separated from the problems of occupation and feelings of hopelessness among Iraqis,'' said Saddalla al- Fathi, former president of Iraq's oil refining organization.
Al-Fathi, a former employee in the secretariat of the Organization of Petroleum Exporting Countries between 1986 and 1994, was speaking in a telephone interview from Dubai, United Arab Emirates.
Shiite Muslim militants loyal to cleric Moqtada al-Sadr set oil pipelines and oil fields on fire last month as part of a standoff with the U.S.-led coalition and Iraqi forces in the southern city of Najaf.
Insurgents also set alight warehouses and the headquarters of South Oil Co., which operates pipelines and terminals through the Persian Gulf.
Strategy Spreading
Militants in other Persian Gulf countries may mimic attacks on Iraq's oil installations to bring down other regimes that rely on oil for most of their income, said Ibrahim.
``The idea that you can challenge a government which depends on oil for its income is migrating to Gulf countries such as Saudi Arabia,'' Ibrahim said.
Saudi Arabia, the world's biggest oil exporter, is fighting suspected al-Qaeda militants, who in May stepped up attacks near oil-sites in a bid to undermine the economy and bring down the ruling al-Saud family.
The militants are suspected of killing close to 30 non- Saudis since the start of May, including a U.S. engineer who was beheaded in June, in a bid to scare away expatriates who help run the kingdom's industries. Crude oil accounts for 90 percent of Saudi exports.
The attacks prompted international companies such as Swiss engineering company ABB Ltd. to evacuate its foreign staff from Saudi. About 100,000 Westerners, mainly U.S. and U.K. citizens, live and work in the kingdom,
