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Iraq Is Left Oil-Rich but Gas-Poor

The nation with the second-largest reserves of crude is facing a crisis, and that could undermine U.S. rebuilding efforts.

May 10, 2003|Mark Fineman and Warren Vieth | Times Staff Writers

BAGHDAD — The lines at the Freedom Gas Station stretched as far as the eye could see this week, as they did at stations nationwide.

Thousands of Iraqis from all walks of life were enduring a dawn-to-dusk daily ritual unknown before the U.S.-led war to free them: Waiting hours in the broiling sun to fill their gas tanks in a nation that has the second-largest oil reserves on the globe.

"We can't stand this anymore," said taxi owner Nateq Ahmed, 57, who nudged his battered 1986 Chevy Caprice into line at 6 a.m. as he does every other day now. "This is the main problem we are facing. But we don't know who is the cause of it."

Zubaidi Zubaidi, the Freedom station's manager for 12 years, isn't sure, either. But as fistfights broke out at the pumps Thursday morning, he said his customers will blame the Americans if it keeps up. And ultimately, he and many Iraqis in the gas line said, the aggravation could undermine U.S. efforts to help build a prosperous and free Iraq.

"It's getting worse every day. Today is better than tomorrow," Zubaidi said. "I give it another week, then people are going to explode."

Indeed, there is an oil crisis of confounding proportion in oil-rich Iraq.

The reasons for the shortages of gasoline and other vital products, such as natural gas, are as complex as Saddam Hussein's intricate system of energy self-reliance and the international, postwar diplomatic wrangle over the nation's single most valuable resource: the billions of barrels of crude oil that lie beneath its deserts.

In one of Iraq's many postwar ironies, the most immediate cause of the shortages is overabundance. Iraq's pipelines and storage tanks are full of products the country can neither consume nor export -- crude oil and the fuel oil that is a byproduct of refined gasoline.

In short, the oil system is packed to the brim from Baghdad to the nation's borders, according to senior Iraqi oil engineers and global energy analysts.

"The Iraqi oil industry is a chain of reactions, all of them connected," explained Dathar Khashab, a veteran manager at Baghdad's Doura Refinery who became its director general after the war. "When one link fails, the system fails."

In normal times, the Doura plant supplies about 800,000 gallons of gasoline a day, which meets the capital's needs. That process also produces large quantities of fuel oil, which drives the city's main power plant and its factories, with some left over for export.

But the power plant is running at just 40% capacity, after the Baghdad section of the nation's power grid was shut down and badly damaged during the war. The factories are closed. And the debate over Iraq's future oil sales has left exports in limbo.

As a result, Khashab said he can produce only 400,000 gallons of gasoline a day because he's running out of places to put the fuel oil. Otherwise, he added, "this refinery can go up to full capacity in a short time."

"It's like the chicken and the egg," said Robert Ebel, energy program director at the centrist Center for Strategic and International Studies in Washington.

Iraq faces a similar dilemma in producing natural gas, which most Iraqis rely on for cooking.

"This is only produced when you have big quantities of crude oil produced, and if you don't process huge quantities of crude, you can't produce natural gas," Khashab said.

Iraqis consume 5,000 tons of natural gas each day, he said, "and right now, we're producing none."

So acute are the shortages here that U.S. and Iraqi authorities announced plans this week akin to bringing sand to the desert: Importing a 30-day supply of natural gas and 20 days' worth of gasoline. The United States will pay for the emergency supplies, officials said.

But efforts to alleviate the shortages long-term by resuming Iraq's oil exports, which would clear the pipelines and storage tanks, are plagued by postwar uncertainty over who will control the country's reserves.

Before the war, under the United Nations oil-for-food program, U.N.-supervised oil exports moved through pipelines to the Persian Gulf port of Mina al Bakr and the Mediterranean port of Ceyhan in Turkey. Iraq also smuggled oil through Syria, Jordan, Turkey and other destinations via pipelines, trucks and ships.

No oil has been sold since March 19 under the program, which now has more than $13 billion in a U.N.-controlled escrow account. The U.N. Security Council extended the program until June 3 and gave Secretary-General Kofi Annan temporary authority to revamp the rules so about $2.5 billion could be used to send food and medicine to Iraq.

But no action was taken to authorize additional oil sales, and the United States wants to phase out the program within four months.

Under a draft Security Council resolution unveiled Friday, the Bush administration wants the U.N.'s blessing to resume exports.

Proceeds would be placed in a reconstruction fund administered by U.S., British and international overseers.

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