By Hassan Hafidh, Of Dow Jones Newswires
Frequent insurgent attacks on oil pipelines and a lack of investment in the Iraqi oil sector has cost the war-ravaged country $24.7 billion in lost revenues, which could have been generated from crude oil exports in 2004, 2005 and the first six months of 2006, a new report issued by the Oil Ministry's Inspector General said Sunday.
"Losses of revenues because of suspension of Iraq's crude oil exports from northern Iraq for the period between 2004 and mid 2006 were estimated at $8.5 billion," the independent inspector said in his report, a copy of which was obtained by Dow Jones Newswires.
It said more than $7.5 billion of revenue was lost for the same period because of damage to oil wells, oil pipelines, and lost crude oil and oil products.
The rest of the revenue losses were caused by a drop in oil production, it added.
Constant sabotage against Iraq's northern oil pipelines has kept Iraq's northern oil exports shut down for most of the time since the U.S.-led invasion in 2003. Before the U.S.-led war, Iraq used to export around 800,000 barrels a day from its northern oil fields.
Iraq's current crude oil exports - almost all of which are now from the south - are running at around 1.5 million b/d, while before the war they were 2.2 million b/d.
The report said that crude oil production in 2004 averaged 1.99 million b/d, while the Iraqi Oil Ministry was planning to produce at least 2.68 million b/d.
In 2005, the ministry planned to produce an average of 2.42 million b/d, while actual production fell to 1.85 million b/d. For the first six months of 2006, output was 1.95 million b/d, while the target was 2.66 million b/d, it added.
The inspector's report attributed the decrease in Iraq's crude oil production to "various problems and setbacks", the most important of which was the ministry's failure to implement its ambitious plan to upgrade the country's war- hit industry.
In 2005, only half the more-than $2 billion allocated by the government as an investment plan for the oil sector was spent, the report said.
It said that only $290 million were spent in the first six month of 2006 to upgrade the country's oil industry, out of the government's total allocation of $3.5 billion for the whole of 2006.
The report said many of the so-called "strategic projects" aimed at increasing production, exports and refining capacity haven't been implemented, citing a lack of participation from international companies and contracts because of security issues and a delay in the release of money by the Ministry of Finance.
The report suggested several steps that should be taken in order to increase Iraq's crude oil production and exports. Among these is the creation of an Iraqi national oil company to oversee the country's oil sector; the upgrading of the oil exports measuring systems; and an increase in the capacity of exports at Iraqi oil terminals in the south.