Major Problems Found With Iraqi Oil Ministry

Iraq Oil Report recently had an article on a 2008 audit done of the Iraqi Oil Ministry, which found massive on-going problems. The depth of the difficulties touched upon every aspect of the Ministry from its bureaucracy to its oil operations to its business dealings. Here is a rundown of the audit’s main findings:

1. There is a lack of control over accounts and receipts

2. As of December 31, 2008 only one-third of Iraq’s plan to install meters on its oil industry had been completed

3. The North Oil Company burned 1.4 million barrels of oil condensates because it couldn’t sell it

4. The state-run oil companies re-injected 605,000 barrels of oil back into the fields damaging them

5. There were 698,000 unaccounted for barrels of oil which were believed to have been stolen

6. The Ministry recorded 6 million less barrels of oil than the South Oil Company claimed it produced

7. The Ministry put $3 billion in oil revenues in an Iraqi bank that was supposed to be deposited in Iraq’s oil account in the New York Federal Reserve Bank

8. The Ministry was fined $24.4 million for delinquent carrier loading

9. It hasn’t collected $26.2 million from Shell for reducing its shipping costs

10. It hasn’t collected $9.1 million from oil sales to Jordan

Iraq depends upon oil for over 85% of its revenue. Although Iraq has the third largest petroleum reserves in the world, its oil production has been hobbled by years of wars and sanctions, which severely limited investment and maintenance leaving much of the infrastructure old and deteriorating. The Oil Ministry claims it needs $75 billion to reach its potential. In the meantime, Iraq has been roundly criticized for its haphazard, and contradictory oil plans. The country doesn’t have a strategic vision for developing its oil and natural gas, the Oil Ministry lacks trained and qualified personnel, equipment, and services, and oil legislation has been deadlocked in parliament for years because it is one of the major disputes between Baghdad and Kurdistan. The 2008 audit just adds to this already long-list of difficulties Iraq is facing with its most precious resource.

SOURCES

International Crisis Group, “Iraq and the Kurds: Trouble Along the Trigger Line,” 7/8/09

Lando, Ben, “Mixed review,” Iraq Oil Report, 8/16/09

Special Inspector General for Iraq Reconstruction, “Quarterly Report and Semiannual Report to the United States Congress,” 7/30/09