Work set on Iraq oil metering system

By Irwin Arieff

UNITED NATIONS (Reuters) - Iraq, under international pressure to crack down on oil smuggling, is finally starting work on a long-delayed system to metre its oil production, an Iraqi diplomat said on Friday

The Iraqi Oil Ministry has reached a preliminary agreement with the Royal Dutch Shell group <RDSa.L> to consult with it on creation of a system measuring the flow of oil, gas and related products, whether inside Iraq or for export to foreign markets, said Deputy U.N. Ambassador Feisal Amin al-Istrabadi.

The ministry also has concluded an agreement to rebuild a metering system in its southern oil port of Basra, where oil is loaded onto tankers for export, the U.N. envoy said in a March 22 letter circulated at the United Nations on Friday.

"This long-term development project will be implemented in stages that may be fulfilled in one or two years," he said.

The letter was addressed to the International Advisory and Monitoring Board, created by the U.N. Security Council in 2003 to watch over the stewardship of Iraq's natural resources.

The board had no immediate comment on the Iraqi letter. One member called the letter a step forward but said it was now up to Iraq to fulfil its promise.

"It's progress. We're looking forward to the results," said the board member, speaking on condition of anonymity because he was not authorised to speak on the board's behalf.

The international watchdog, beginning in March 2004, has regularly called on Iraq to metre its oil production, in line with standard industry practice.

The project has been repeatedly delayed amid reports of extensive smuggling, including allegations that Iraqi oil is being diverted from the marketplace to fuel the insurgency crippling the country's reconstruction.

The board's plea for oil metering was initially addressed to the U.S.-led Coalition Provisional Authority, which governed Iraq after the March 2003 invasion, and later to the Iraqi authorities who took back power in June 2004.

Al-Istrabadi said the metering system in Basra would be rebuilt with U.S. funding. His letter did not say how the contract with Shell or construction of the measuring system would be financed, and his office said he was away on Friday and not immediately available for comment.