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Iraq

Q&A

©Associated Press
March 19, 2003

A war is almost certain to disrupt oil exports from Iraq. Here are some questions and answers relating to Iraq's oil production:

* * *

Q. How big are Iraq's oil reserves?

A. Iraq has an estimated 112.5-billion barrels in proven reserves, the world's second-largest after Saudi Arabia's. As many as 220-billion additional barrels are considered probable reserves.

* * *

Q. Is Iraq free to sell its oil as it wants?

A. No. Iraq is a member of the Organization of Petroleum Exporting Countries, but the bulk of its exports are overseen by the United Nations under the "oil-for-food" program. Oil is Iraq's main source of foreign exchange. The United Nations set up the program in 1996 to monitor Iraqi shipments. Baghdad must spend its revenues from oil sales on humanitarian goods and nonmilitary equipment and to pay reparations dating from the 1991 Persian Gulf War.

* * *

Q. How much oil does Iraq produce and export?

A. Iraq's daily production averaged 2.5-million barrels in February, according to the Paris-based International Energy Agency. U.N.-approved shipments averaged 1.7-million barrels a day last month, but analysts expect exports to dwindle in March -- even without a war -- as more banks and buyers grow wary of doing business in a potential conflict zone.

Also, Iraq typically exports more than 300,000 barrels a day outside official U.N. trade channels, to Syria, Jordan and Turkey.

* * *

Q. Who buys Iraqi oil?

A. The United States tends to be the biggest importer of Iraqi crude, buying 366,000 barrels a day during December 2002. Iraq was the seventh-biggest supplier of U.S. crude imports that month, according to the U.S. Energy Information Administration. Iraq's other customers include France, Italy, Spain and the Netherlands.

Last month, about two-thirds of Iraq's exports went to importers in North and South America. More than half of this amount ended up in the United States.

The buyers that deal directly with Iraq are often small, Russian-owned trading companies acting as middlemen. They ship the oil from Iraq to refiners and other users in importing countries.

* * *

Q. What are conditions like in Iraq's oil fields and facilities?

A: More than 12 years of U.N. sanctions imposed after Iraq's invasion of Kuwait, which led to the Gulf War, have starved Iraq's oil industry of fresh investment, supplies and spare parts. The Iraqis have kept crude flowing in spite of these limitations, although analysts say this success may have come at the cost of permanent damage to some oil fields.

Estimates of the money and time needed to upgrade Iraq's oil infrastructure vary. Some analysts argue that Iraq would need several years and tens of billions of dollars to boost its output capacity much above what it was in 1990, on the eve of Operation Desert Storm.

* * *

Q. Where are Iraq's most important oil fields and facilities?

A. Iraq's production is concentrated in two main areas: in northern Iraq around the city of Kirkuk and in the south around Basrah. Kirkuk yields about 700,000 barrels a day, most of which is exported via a pipeline to the Mediterranean port of Ceyhan, Turkey. In 1991, Kurdish fighters briefly occupied the headquarters of the Kirkuk oil facilities.

The largest southern field is Rumaila, with a total output of 1.3-million barrels a day. Oil from southern Iraq is shipped largely from the Persian Gulf export terminal of Mina al-Bakr.

* * *

Q. How is Iraq's oil industry organized?

A. A government-run monopoly, the State Oil Marketing Organization, controls the production, processing and sale of Iraqi crude. Some U.S. officials want to dismantle the monopoly and privatize Iraq's oil industry. They argue this would boost efficiency and ensure investment opportunities for private businesses, including multinational companies from the United States.

-- SOURCES: International Energy Agency, Center for Global Energy Studies, U.S. Energy Information Administration, Energy Intelligence Group, Council on Foreign Relations, The James A. Baker III Institute for Public Policy at Rice University, United Nations.

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