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IMPACT OF THE GULF WAR : Postwar Kuwait's Oil Output May Be Crippled for Years : Energy: Repairs to refineries and other facilities could cost up to $50 billion and take more than two years to complete. Analysts say world supplies are adequate to offset such a shutdown.

February 23, 1991|PATRICK LEE | TIMES STAFF WRITER

The smoke rising from more than 150 flaming Kuwaiti oil wells is darkening more than the desert horizon: It is casting a pall over the emirate's prospects of resuming oil production at pre-invasion levels any time in the near future.

Analysts believe that the damage to the wells may significantly impair Kuwait's ability to pump oil for months or years once the war ends. Already the destruction is "massive," said Ole Bjerregaard, a spokesman for Kuwait Petroleum International in London.

As bad as the fires may be, war damage to Kuwait's other oil installations could be more serious, analysts and industry officials said Friday.

Repairs to refineries, port facilities, treatment plants and pipelines could easily cost $40 billion to $50 billion and take as long as three years to complete--during which time Kuwait would be unable to resume its previous level of exports.

It is widely believed that the Iraqis have inflicted considerable damage to the three main Kuwaiti refineries, considered the most sophisticated in the world.

Loss of that refining capacity--as much as 800,000 barrels a day before the invasion--would tighten supplies of such commodities as jet fuel and diesel, especially in Europe and Asia, for as long as it took to make repairs.

Experts said the world will have more than enough oil production, even if Kuwait's wells remain idle once the war ends. Kuwait and Iraq have not exported oil since the August invasion, and other nations have already taken up the slack. At one point before the Iraqi invasion, Kuwait was producing more than 1.7 million barrels a day.

An indicator of market conditions is that oil prices continued to fall Friday despite word of the fires. Light, sweet crude oil for April delivery dropped 59 cents to $17.91 a barrel in trading on the New York Mercantile Exchange.

Observers believe that Iraq is intent on destroying Kuwait's oil industry infrastructure in what allied military leaders are calling a "scorched-earth policy." But just how much damage is being done won't be known until the war is over, analysts said. And that makes it difficult to say precisely how long repairs may take or how much they may cost.

The Kuwaitis have been aggressively putting together a plan to restore their battered industry once hostilities cease. They have talked with all the major engineering and construction firms in the United States and Great Britain and many elsewhere.

The firms include Fluor Corp. in Irvine and Bechtel in San Francisco, both of which have done work in Kuwait before. Neither has signed contracts yet, spokesmen said.

Of Kuwait's 1,000 or so producing oil wells, more than 150 have been set ablaze, the U.S. military command said Friday. It's unclear how many more may have explosives attached to them. Assuming that firefighting teams can get to the burning wells, the fires could be put out relatively easily if damage is confined to the upper portion of the wells--the so-called Christmas trees, or valve assemblies, experts said.

But if explosives were planted below the surface or affected the concrete lining of the wells, the fires would be more difficult to extinguish, said Joe Bowden, president of Wild Well Control Inc., one of several oil-well firefighting firms talking with the Kuwaitis.

If the well fires are closely clustered, it would make the job of fighting them more difficult.

Once the fires are put out, it may be impossible to repair wells with damage extending deep below the surface. In that case, workers may have no choice but to cap them with concrete and drill a new well somewhere else.

It's unlikely that the well fires could permanently damage Kuwait's vast reservoirs of oil--at 94.5 billion barrels the world's third largest.

Only the 50,000-barrel-a-day Minagish oil field could present a problem, according to the industry newsletter Petroleum Intelligence Weekly.

In that field, a system of natural gas injection could make the fires more difficult to extinguish, depending on where explosive charges were set. Prolonged fires in the field could result in "extensive reservoir damage," PIW reported.

As bad as well fires might be, damage to other oil installations could be even more devastating to Kuwait's ability to produce petroleum, experts said.

Once oil is pumped out of wells, it must be transported and collected through a network of pipelines, processed through plants that separate natural gas from oil and either sent to the nation's three major refineries or pumped to marine terminals for loading onto tankers.

Repairing "those things takes longer than just drilling a well," said Sarah Miller, PIW editor.

Fires have been reported in storage tanks at two Kuwaiti refineries, and Kuwait watchers believe that the Iraqis have already carted off much of the sophisticated equipment necessary to run the oil installations.

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