Monday, June 27, 2011

Iraq’s Oil Industry Under Attack

Iraq’s insurgents are targeting the country’s oil industry. In June 2011, there were five attacks, four upon infrastructure, and one upon a visiting delegation from Iran’s Oil Ministry. These were the first attacks upon Iraq’s petroleum business since March, which points to a new campaign to undermine the nation’s most important resource.
Baiji oil refinery in Salahaddin was attacked in June and March 2011 (Iraq Oil Report)
In June there were a series of headline grabbing assaults upon Iraq’s Oil Ministry. On June 27, a rocket was fired at the Shuaiba oil refinery in Basra, and the police found two others before they went off. Three days before, the Baiji refinery in Salahaddin was bombed. First reports simply said an explosion occurred at the facility, which caused a fire that took four hours to put out. It was then revealed that the cause was a bomb that went off near a gas pipeline around 2:30 am, but which did not cause any major damage. Two days before that, men shot at a caravan carrying a delegation from the Iranian Oil Ministry through eastern Baghdad with silencers. Two guards were wounded. The cars belonged to the Oil Ministry, and it was unclear whether the assault was aimed at the Iranians or just an attack upon government vehicles. On June 15, four bombs were found at the Daura refinery in Baghdad. Officials said that it was an inside job, and several guards were arrested as suspects. Finally on June 5, the Zubair oil field in Basra was attacked. Reports differ as to whether it was hit by bombs or rockets, but its oil storage facility was hit, setting its petroleum reserves on fire. The day before, Deputy Premier Hussein Shahristani who is in charge of the country’s energy policy had visited Zubair. All these attacks point towards a new insurgent campaign against Iraq’s resources. The last time any facilities were targeted was back on March 8, when the northern pipeline to Turkey was bombed, closing it down for five days for repairs. The fact that the Zubair field was hit and the Shuaiba refinery was targeted was also something new, as the southern fields, which hold the vast majority of Iraq’s reserves, have not been threatened for years.

Oil is Iraq’s most important resource. It provides nearly 90% of the country’s revenue, and the government is hoping to vastly ramp up production with foreign contracts it signed in 2009. Striking at the industry now, just as that process is beginning to take off not only grabs headlines for the insurgents, which they can use to raise money, but also puts added pressure on the government. The militants are also probably hoping that they can scare some of the international businesses as well. The problem for the insurgents is that they lack the resources to maintain any campaign for more than just a few weeks. Hopefully that means there are only a few more attacks before they have to re-group, re-arm, and move onto their next target.


Agence France Presse, “Bombed Iraqi pipeline to be fixed ‘in five days,’” 3/10/11

Aswat al-Iraq,"Katusha rocket falls close to Basra refinery," 6/27/11
- “Rocket attack sets fire to oil reserve field in South Iraq,” 6/5/11

DPA, “Iraq’s largest oil refinery shuts down after fire,” 6/24/11

El Gamal, Rania, “UPDATE 2-Bombs hit Iraq oil tanks in rare southern attack,” Reuters, 6/5/11

Lando, Ben, “Beiji bombed again,” Iraq Oil Report, 6/24/11
- “UPDATE: Iranian oil delegation attacked in Baghdad,” Iraq Oil Report, 6/22/11

Reuters, “Iraq army defuse bombs at key oil refinery-sources,” 6/17/11


Anonymous said...

This isn't going to be a positive for investors, that's for sure. Certainly the U.S. has to be concerned about Iraqi physical security, and that's mostly what we hear about. But by not being able to stop this type of activity, Iraq's economic security is threatened. It's a rentier state, we all know that, and oil is the nation's lifeblood. And now Iraq demonstrates it cannot protect that resource even with foreign troops present — that will make foreign investors wary and could lead to problems for the nation's economy. Iraq needs to diversify its economy, but it will need oil to get the ball rolling.

Joel Wing said...

I think that's what insurgents want the public and companies to think, but the damage done, and the number of attacks is still relatively small. The northern pipeline for example gets bombed every couple months, but that's only able to shut it down for maybe 1-5 days.

The south is where the vast majority of the oil is and where the foreign companies have signed contracts, but like I wrote in the article June was the first time those fields have been targeted in years. Otherwise, it's basically safe.

Look at it this way, oil companies are currently working in Nigeria where there are militant groups in the South, and they spent years in Angola in the middle of a civil war, so Iraq isn't much different. If companies could operate in those environments, they can work in Iraq.

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