Iraq exports first crude oil since war

CEYHAN OIL TERMINAL, Turkey -- Iraq returned to the world oil market Sunday, exporting its first crude oil since the U.S.-led invasion, a step crucial for paying for the country's reconstruction.\nThe loading of tankers at this Mediterranean port caps two months of efforts since the fall of Saddam Hussein to restart the flow of oil revenues. Iraq is expected to start shipping oil from its other major outlet, the terminal of Mina al-Bakr on the Persian Gulf, next weekend.\nBut still unsure is when Iraq can begin pumping fresh oil by pipeline from northern Iraq to Turkey's Ceyhan facility. Damage to pipeline infrastructure caused by war, looting and sabotage will delay that for several more days, U.S. and Iraqi officials said. \nThe oil loaded at Ceyhan on Sunday had been stored at the site since exports were halted March 20. After Saddam's regime crumbled in early April, the process began to open the way for sales to resume: the U.N. Security Council lifted sanctions on Iraq and recognized the U.S.-led coalition's authority over Iraq and its oil revenue. Then, a bid was held for purchases of the stored oil.\nFinally on Sunday, Mohammed Al-Jibouri, the head of Iraq's State Oil Marketing Organization, or SOMO, said a prayer and clicked on the mouse of a computer at the Ceyhan terminal, starting the loading of tankers amid cheers and applause.\nWorkers began loading 1 million barrels of Iraqi crude onto the Turkish tanker Ottoman Dignity in a ceremony attended by senior Iraqi, U.S. and Turkish oil officials. A Spanish tanker, Sandra Tapias, was to be loaded with another million barrels, bought by Spanish refiner Cepsa SA, in the afternoon.\nOnce all the oil is loaded -- a process expected to take 23 hours -- the Ottoman Dignity will take the cargo to a Turkish refinery on the Aegean coast.\n"We're all glad to be here, (to) applaud ... a new Iraq," said al-Jibouri. "And we hope we're going to pump more and more with this export."\nMoney from Iraq's oil sales will go into a U.S.-controlled fund dedicated for reconstruction. Iraq, which has the second largest oil reserves in the world, is in desperate need of funding to repair battered infrastructure -- including its oil facilities -- and rebuild an economy devastated by more than 12 years of U.N. economic sanctions.\nBut it will take a while to get oil flowing smoothly, both in southern Iraq and in the north, where twin pipelines run from the oil center of Kirkuk to Ceyhan.\nOfficials had said they hoped to start pumping along that line as early as Sunday. But Iraqi officials in the north said facilities were not ready: A number of pumping stations, processing plants and degassing facilities still need repair, said Adel Qazal, general director of the Northern Iraqi Oil Company.\nAl-Jibouri said he hoped to begin new shipments to Ceyhan in early July.\nOil industry officials said they would be able to start pumping a modest 200,000 barrels per day by the end of the week, a fraction of the 850,000 barrels per day the Kirkuk-Ceyhan pipeline carried to Turkey. The pipeline has a maximum capacity of over 1 million barrels per day.\nTwo explosions damaged the pipeline earlier this month in what Turkey's foreign minister called sabotage.\nSunday's export "marks the return of Iraq -- on a limited basis -- to its traditional role as an oil exporter," said oil industry expert Gerald Butt of the Middle East Economic Survey, or MEES. The Cyprus-based MEES is a weekly trade journal which closely follows the oil industry.\nIraq is now producing 750,000 barrels a day and Iraqi officials have said they hope to export 1 million barrels a day by the end of June and 2 million barrels a day by the end of the year. Some analysts, however, regard those estimates as too optimistic.\nIraq's acting oil minister, Thamer al-Ghadhban, said a priority for the coming year is "to restore the facilities of the Iraqi oil industry." He said the industry would progressively be raising more money and would be contributing to Iraq's recovery by the end of 2004.\nFor years, Iraq's oil industry has languished due to U.N. sanctions, which barred trade except the sale of oil to fund the purchase of food and other humanitarian aid. Much of Iraq's oil equipment is old due to the trade sanctions and many oil facilities were looted after the war.\nThe United Nations voted last month to end the sanctions. In the weeks after the war, Iraq's oil industry was in such poor shape that the country was forced to import gasoline for local consumption.\nIraq last exported oil from Ceyhan on March 20, as part of the tightly-controlled U.N. sanctions program.\nBefore the war began in March, Iraq pumped around 2.1 million barrels a day. "It could be a year or more before Iraq returns to its pre-war production (and) export levels," Butt said.\nUntil Iraq significantly boosts its oil production, it is unlikely to have an impact on world oil prices.