Iraqi oil reserves vary widely in quality, with API gravities in the 24^o to 42^o range. Iraq's main export crudes come from the country's two largest active fields: Rumaila and Kirkuk. The southern Rumaila field produces three streams: Basrah Regular (34^o API, 2.1% sulfur); Basrah Medium (30^o API, 2.6% sulfur); and Basrah Heavy (22^o-24^o API, 3.4% sulfur). The northern Kirkuk field produces 37^o API, 2% sulfur crude. An additional export crude, known as "Fao Blend," is heavier and more sour, with a 27^o API and 2.9% sulfur. Following post-U.N. sanction development of South Rumaila's Yamamah formation, Iraq plans to export up to 800,000 bbl/d of "Basrah Light" (35^o-40^o API). There is evidence, however, that capacity expansion at the main Kirkuk and Basrah fields could be limited by the presence of water in the reservoirs, and the consequent need for de-emulsifying chemicals and other dewatering equipment. Also, the Basrah fields may require expensive enhanced oil recovery (EOR) techniques and other infrastructure repairs.

Production
Prior to its invasion of Kuwait in August 1990, Iraqi oil production had just recovered from the costly Iran-Iraq War. By July 1990, Iraqi crude oil output had reached 3.5 MMBD, with production capacity at 4.5 MMBD -- the highest levels since 1979. Following Iraq's invasion of Kuwait and the embargo on Iraqi oil exports, though, oil production fell to around 300,000 bbl/d. Through the first 8 months of 1998, Iraqi crude oil production was averaging 2 MMBD, up from 1.2 MMBD in 1997 (in October 1998, production reached approximately 2.4 MMBD). About 550,000-600,000 bbl/d of Iraq's oil output is consumed domestically, either for refining or for direct burning by industrial customers or utilities. Another 90,000-100,000 bbl/d is delivered to Jordan via truck under a special U.N. exemption to sanctions.

In September and October 1998, Petroleum Intelligence Weekly and others reported that Iraq had pushed its oil sector "to the brink" in order to maximize oil production and exports. According to these reports, Iraq needs a rapid infusion of critical oil production equipment, including de-emulsifying chemicals and chlorine, in order to achieve (and sustain) its ambitious target of increasing oil production from early September levels by 150,000 bbl/d, to as high as 2.7 MMBD (Iraq already had increased production by 200,000 bbl/d in August from July levels). As of September 1998, around 1.5 MMBD of Iraqi production appeared to be coming from southern fields (mainly North and South Rumaila) , with an additional 1 MMBD from northern fields. Iraq's battle with "water cut" reportedly was impeding progress, especially in the south.

Exports
U.N. Resolution 986 (originally passed in April 1995) allows Iraq to sell specified amounts of crude oil over six-month periods. Much of the revenue from these sales is allocated for the purchase of humanitarian supplies for distribution in Iraq under the U.N. supervision. The remaining proceeds are used to pay compensation for Gulf War victims, pipeline transit fees for Turkey, and funding for the U.N. special commission (UNSCOM) that is attempting to dismantle Iraq's capability to produce weapons of mass destruction. On February 20, 1998, the U.N. Security Council voted unanimously (Resolution 1153) to more than double (to $5.26 billion) the amount of oil Iraq can sell over six month periods. Since then, Iraq has increased its oil exports, but has not come close to reaching the $5.26 billion limit due to production and export constraints, plus low world oil prices (Iraq has set its own, more realistic, goal of $4 billion, although it most likely will reach only $3.3 billion in the current six-month phase which ends on November 25), according to the United Nations).

For the first 10 months of 1998, Iraq averaged net crude oil exports of around 1.4 MMBD. Besides the 100,000 bbl/d of this going to Jordan, the rest was exported either through the Iraq-Turkey pipeline or the Persian Gulf port of Mina al-Bakr, conforming to the U.N. Resolution 986 mandate that at least half of the "oil-for-food" exports must transit through Turkey. The volume of Iraqi oil exports is likely to increase in 1998, primarily due to an increase in U.N.-permitted exports. Exports in October 1998 appear to be running close to 1.8 MMBD (about half Kirkuk and half Basrah Light). Of this, most was sold initially to Russian, French, and Chinese companies, plus Turkey and Algeria. Oil was then resold to a variety of oil companies, including U.S.-based (see "Energy Overview" section for more detail).

On November 11, 1998, Iraq's State Oil Marketing Organization (SOMO) said that Iraq would honor all oil equipment contracts it had signed with international firms. According to SOMO, Iraq has signed (as of November 11) 474 contracts worth $261 million for the purchase of spare parts for the country's oil industry. Iraq has complained that the United States and the United Kingdom are responsible for blocking such equipment purchases, despite U.N. permission (under Resolution 1175 of June 20, 1998) for Iraq to spend up to $300 million repairing oil facilities. On November 3, 1998, the United Nations claimed that it had approved a total of 111 contracts for spare parts worth $88 million. The United States has said that the $300 million should be used only for short-term improvements to the Iraqi oil industry, and not to make long-term repairs.

In early November 1998, Iraq released a provisional crude oil export plan for November which, over 25 days, would imply oil exports of 1.81 MMBD (not including the 90,000-100,000 bbl/d going to Jordan). Of this, 974,000 bbl/d would be exported via the Turkish port of Ceyhan, and 833,000 bbl/d of Basrah Light from the Gulf port of Mina al-Bakr. Even with these relatively high export levels, SOMO would remain around 40 million barrels short of fulfilling its 332 million barrels worth of sales commitments for the fourth phase of the "oil-for-food" deal. Iraq has considered adding a third export stream, Basrah Medium, which could be exported by utilizing the north-south Rumaila-Haditha line. Oil could then enter the pipeline system running to Ceyhan.

A U.N. technical team in March 1998 reported on the "lamentable state" of Iraq's oil industry, putting Iraq's production capacity at 2.16 MMBD, with local consumption (including exports to Jordan) of 630,000 bbl/d. The U.N. team said that spare parts could help raise Iraq's oil production capacity to 2.36 MMBD within 6 months. OPEC has estimated that Iraq could reach sustainable output of 2.5 MMBD with funds currently allocated. Iraq says that with needed spare parts, it could raise production capacity to 3 MMBD, implying exports of 2.3 MMBD.

The United Nations has authorized Iraqi export of oil to Jordan as an exception to the general embargo on Iraqi oil exports. In December 1997, Iraq agreed to increase its crude oil and refined product exports (at half the world price) to Jordan in 1998 to 96,000 bbl/d, from about 90,000 bbl/d in 1997. Iraq uses revenues from these sales to buy Jordanian goods and services and to settle outstanding Iraqi debts to Jordan. In August 1998, Iraq and Jordan signed an agreement for construction of a 100,000-bbl/d pipeline to pump Iraqi crude to the Jordanian refinery at Zarqa instead of transporting the oil via truck. The pipeline could cost $2 billion.

In addition to U.N.-sanctioned oil exports to Jordan, there have been periodic reports that Iraq has smuggled up to 100,000 bbl/d of crude oil and products via a number of routes. These include: to Turkey via truck, to India and Pakistan along the Gulf coast from Jebel Ali, to Iran across the Fao Peninsula with barges, and to Dubai with the use of small tankers sailing from Umm Qasr. Press reports also have estimated that these illegal shipments may have provided Iraq with as much as $700 million a year in revenues. It is unclear at present (November 1998) to what extent, if at all, Iraqi oil smuggling continues.

Iraq's Oil Industry
Iraq nationalized its oil industry in 1972 and subsequently placed all operations under the control of the Iraq National Oil Company (INOC). A number of semi-autonomous companies under INOC handle specific functions such as exploration, engineering, transportation, refining, and international marketing. The Iraqi nationalization resulted in the seizure of assets from the Iraqi Petroleum Company (IPC), which comprised British Petroleum, Total, Shell, Exxon, Mobil, and Partex. Prior to the Iran-Iraq War, IPC as well as companies operating under service contracts (Brazilian state-owned Braspetro and Elf Aquitaine) made significant discoveries in Iraq, such as Kirkuk (1927), Rumaila (1953), Buzurgan (1969), Abu Ghirab (1971), Majnoon (1976), and Nahr Umar (1977).

Oil Field Development, War, and Current Status
Iraq's southern oil industry was decimated in the Gulf War, with capacity falling from 2.25 million bbl/d to 75,000 bbl/d in mid-1991. The largest producing oil field in this region is Rumaila. The Gulf War resulted in destruction of production infrastructure (gathering centers, compression/degassing stations) at Rumaila, storage facilities, the 1.6-MMBD (pre-war capacity) Mina al-Bakr export terminal, and pumping stations along the 1.4-MMBD (pre-war capacity) Iraqi Strategic Pipeline. SOC has 7 other sizable fields which remain damaged or partially mothballed. These include Zubair, Luhais, Suba, Buzurgan, Abu Ghirab, and Fauqi.
The Kirkuk field, originally brought online by IPC in 1934, still forms the basis for northern Iraqi oil production. Kirkuk has over 10 billion barrels of remaining proven oil reserves. The Jambur, Bai Hassan, and Khabbaz fields are the only other currently- producing oil fields in northern Iraq. While Iraq's northern oil industry remained relatively unscathed during the Iran-Iraq War, an estimated 60% of Northern Oil Company's (NOC) facilities in northern and central Iraq were damaged in the Gulf War. Also, post-1991 fighting between Kurdish and Iraqi forces in northern Iraq resulted in temporary sabotage of the Kirkuk field's facilities. In 1996, production capacity in northern and central Iraq was estimated at between 0.7-1 MMBD, down from around 1.2 MMBD before the Gulf War.

Most war-related damage was repaired by 1993, although questions remain about water production problems. Since that time, NOC has used field rotation to keep production facilities in working order until the lifting of U.N. sanctions. In late October 1998, Iraq's Oil Minister Amir Mohammed Rashid said that Iraq had lowered its crude quality in order to boost sales and revenues. To accomplish this, Iraq had decided to mix superior quality Kirkuk oil with lower-quality, higher-sulfur crude from other fields. This has resulted in a lowering in the quality of Kirkuk oil, to an estimated API gravity of around 34^o-35^o, down from the normal 36^o API and sulfur content of 2% (up from 1.7% previously). Iraq also reportedly has pushed production at Kirkuk to levels higher than are considered proper by reservoir engineers. According to Oil Minister Rashid, Iraq has been forced to take these actions due to the country's inability to import necessary oil equipment, and that this is "inflicting damage" to Iraq's oil industry.

With Total's technical assistance, the 11-billion barrel East Baghdad field came online April 1989 following the Iran-Iraq War. This centrally-located field currently produces 50,000 bbl/d of heavy, 23^o API oil as well as 30 million cubic feet per day (Mmcf/d) of associated natural gas. Iraq hopes to add additional facilities to boost output to over 150,000 bbl/d. In April 1994, the long-postponed Saddam field development was completed, although there are conflicting reports as to whether the field is currently online. Saddam contains 3 billion barrels of oil and 5 trillion cubic feet (Tcf) of associated gas. Iraq is seeking foreign assistance for a second-phase Saddam development, which would raise oil production capacity from 25,000 bbl/d at present to 50,000 bbl/d, as well as 300 Mmcf/d of gas.

The Post-U.N. Sanctions Development Plan
In May 1997, Faleh al-Khayat, Director General for Planning at the Iraqi Oil Ministry, was quoted in the trade press as stating that 3 MMBD of production capacity could be reached within 1 year, 3.5 MMBD within 3-5 years, and 6 MMBD in less than a decade after the lifting of U.N. sanctions. This would be accomplished by a 3-phased development effort including: 1) re-working and upgrading existing upstream and downstream facilities; 2) attracting foreign investment for new field development and production; and 3) actively conducting exploration and development activities in prospective areas such as the Western Desert.

Field development work under the three phases would be extensive, with 33 fields containing 50 billion barrels of reserves and a potential production capability of 4.65 MMBD slated for eventual development. Of these 33 fields, twenty-five have been appraised, but never developed. Of the 25 appraised fields, eleven are located in southern Iraq and have an output potential of 3 MMBD. Smaller, undeveloped fields are located in northern and central Iraq and have estimated output capabilities of 450,000 bbl/d and 300,000 bbl/d, respectively. A further eight of the 33 fields are already in production, but will require more work to tap additional reservoirs and to bring another 900,000 bbl/d of production online.

Although development costs in Iraq are as low as $1/barrel, there is no doubt that any post-sanction oil program will require massive amounts of foreign investment. In May 1997, former Iraqi Oil Minister Fadhil al-Chalabi estimated that Iraq would need at least $5 billion of foreign investment during the first 2-3 post-sanction years in order to bring the country's oil output back to pre-Gulf War levels. He also projected that $30-$50 billion of foreign investment would be required to bring capacity up to 6 MMBD.

As of March 1998, there reportedly were dozens of foreign oil companies from a wide variety of countries in discussions with the Iraqi government (see table at the end of this report). U.S. firms which have held talks on Iraqi field development include: Amoco, Arco, Chevron, Coastal, Conoco, Exxon, Mobil, Occidental, and Texaco. Iraq plans to offer new fields to foreign oil companies through production sharing contracts (PSC), joint ventures, and service contracts. Initially, Iraq plans to offer up to 25 new fields to foreign companies. Ten of these fields, with a production potential of 2.7 MMBD, are slated for development under PSCs with foreign companies. Four of these fields are located in southern Iraq and, with a combined production potential of 2.1 MMBD, represent the cornerstone of Iraq's post-sanction development plans. These four "giant" southern fields are Majnoon, West Qurna, Nahr Umar, and Halfaya.

As of October 1998, Iraq had signed PSCs (reportedly on relatively generous terms) for a handful of post-sanction field developments. One deal is with the China National Petroleum Corporation (CNPC) and Chinese state-owned Norinco for development of the al-Ahdab field. Al-Ahdab is located about 40 miles south of al-Kut in central Iraq. The field contains an estimated 1.4 billion barrels of oil and has a production potential of roughly 90,000 bbl/d. CNPC and Norinco reportedly have formed a new company, named al-Waha, to undertake the field development. Development and operating costs are expected to be around $1.3 billion. U.N. sanctions have, to date, apparently limited CNPC to limited, mainly surveying, work on al-Ahdab.

Russia, which is owed $7 billion by Iraq for past arms deliveries, has a $3.5 billion, 23-year deal with Iraq to rehabilitate Iraqi oilfields, particularly the 15-billion-barrel West Qurna field (located west of Basra near the Rumaila field). Production is to begin only once U.N. sanctions are lifted. Since a deal was signed in March 1997, Russia's Lukoil (the operator, heading a Russian consortium plus an Iraqi company to be selected by the Iraqi government) has prepared a plan to install equipment with capacity to produce 100,000 bbl/d from West Qurna's Mishrif formation by March 2000. Lukoil has been hampered by sanctions in conducting needed 3D seismic or drilling work. Overall, the West Qurna PSC is to include development of the Yamamah and deeper Mishrif reservoirs, which, combined, contain 7-8 billion barrels of light (37^o API) and heavy (27^o API ) crude oil, respectively. West Qurna has estimated production potential of 500,000-750,000 bbl/d, two-thirds of which will be heavier Mishrif crude. At present, most of the required production wells have been drilled, although a crude pipeline spur and associated gas processing stations are only partially completed. Completion of first phase development could take up to a year, but it is unclear exactly how much surface work remains and whether this is included in the recent PSC, which is valued at $3.7 billion.

Besides West Qurna, PSCs for the three other large southern oil fields are in various stages of negotiation. The largest of the four fields is Majnoon, which has reserves of 10-30 billion barrels of 28^o-35^o API oil. Located only 30 miles north of Basrah on the Iranian border, Majnoon originally was discovered and partially appraised by Braspetro in the late 1970s. Prior to the outbreak of the Iran-Iraq War, 24 wells had been drilled to assess the field's 14 oil-bearing zones. Since that time, Iraq has conducted limited reservoir and design studies. As of October 1998, French companies Elf Aquitaine and Total were negotiating with Iraq on development rights for Majnoon. In the past, it was reported that Elf would retain operatorship and a 40% stake in the $3-$4 billion project. Initial output at Majnoon is expected to be 300,000 bbl/d, with later development yielding 600,000 bbl/d or more. Ultimate production potential is estimated at up to 2 MMBD.

As with Majnoon, the 6-billion barrel Nahr Umar field was explored and appraised by Braspetro in the mid- to late 1970s. Prior to the Iran-Iraq War, five wells had been drilled. France-based Total apparently has all but agreed with Iraq on development of Nahr Umar. Initial output from Nahr Umar is expected to be around 440,000 bbl/d of 42^o API crude, but may reach 500,000 bbl/d with more extensive development.

The 5-billion barrel Halfaya project is the final large field development in southern Iraq. Italian Agip originally drilled four appraisal wells at Halfaya under a service contract in the 1970s. A variety of companies reportedly have shown interest in the field, which could ultimately yield 200,000-300,000 bbl/d in output.

Smaller fields with under 2 billion barrels in reserves also are receiving interest from foreign oil companies. These fields, along with anticipated maximum production levels, include: Nasiriya (250,000 bbl/d); Khormala (100,000 bbl/d); Hamrin (80,000 bbl/d); and Gharraf (100,000 bbl/d). As of March 1998, Italy's Agip was thought to be close to signing a contract for the Nasiriya development. In the past, Agip officials have stated that they would like to use the field's access to infrastructure as a "reference point" for development of a number of satellite fields. Spain's Repsol also appears to be a strong possibility to develop Nasiriya.

In addition to the 25 new field projects, Iraq plans to offer foreign oil companies service contracts to apply technology to 8 already-producing fields. This will include new reservoir development at the North and South Rumaila, Zubair, Luhais, Subba, Abu Ghirab, Buzurgan, and Fuqa fields. Iraq also will provide incentives to promote exploration in the remote Western Desert. Located near the Saudi and Jordanian borders, Iraq has identified at least 110 prospects from previous seismic work in this region. As of December 1997, Calgary-based Ranger Oil was reported to be in discussions with Iraq on a $163 million deal to develop an oilfield in this area.

Oil Export Pipelines/Terminals
Much of Iraq's export capability was lost during the Iran-Iraq War, either to war-related damage or due to political reasons. In 1982, for instance, Syria (allied with Iran at the time) closed the 500-mile, 650,000-bbl/d-capacity Banias pipeline, which had been a vital Iraqi access route to the Mediterranean Sea and European oil markets. By 1983, Iraq's export capabilities were only 700,000 bbl/d, or less than 30% of operable field production capacity at that time. The respite prior to the Gulf War allowed Iraq to resume oil exports of about 2.8 MMBD (1.6 MMBD via the Kirkuk-Ceyhan pipeline, 800,000 bbl/d via the IPSA pipelines across Saudi Arabia, 300,000 bbl/d out of Iraq's Mina al-Bakr terminal, and around 100,000 bbl/d by truck through Turkey).

Pipelines
The 600-mile Kirkuk-Ceyhan pipeline is Iraq's largest operable crude export pipeline. This Iraq-Turkey link consists of two parallel lines built in 1977 and 1987. A 40-inch line has a fully-operational capacity of 1.1 MMBD. A second, parallel 46-inch line has an optimal capacity of 500,000 bbl/d and was designed to carry Basrah Regular exports, for a combined capacity of 1.6 MMBD. At present, however, total capacity on these lines appears to be little more than half of that due to corrosion damage on the smaller line between the IT-1 and IT-1A pumping stations. The 40-inch line has additional pumping stations and fewer bottlenecks, which allow for greater throughput than that of the larger line. In the Gulf War, both pipelines were disabled when the crucial IT-2 pumping station, located about 93 miles south of the Turkish border, was destroyed. Restoring IT-2 reportedly would allow pumping of 1.6 MMBD through the system. To make IT-2 operational, Iraqi officials have said that they need controls and associated valves costing around $50 million. The IT-1 pumping station near Kirkuk received lighter damage and is presently functional. The subsequent imposition of U.N. sanctions on Iraqi crude exports resulted in a complete closure of the Kirkuk-Ceyhan pipeline between 1991 and 1996. In September 1997, Iraq briefly threatened to stop pumping oil through the Kirkuk-Ceyhan pipeline unless it received requested spare parts it said were needed to repair the line (the United Nations has authorized some repairs). Turkey estimates that it has lost $30-$35 billion in transit and other revenues due to the embargo on Iraq.

On August 20, 1998, Iraq and Syria (which in June 1997 reopened their border -- after a 17-year closure -- for trade and official visits) reportedly signed a memorandum of understanding for the possible reopening of the Banias pipeline from the Kirkuk oil fields in northern Iraq to Syria's Mediterranean port of Banias. It is estimated that the pipeline could be made operational again in 18 months or less. The Banias pipeline was closed by Syria in 1982 as a way to support Iran during the Iran-Iraq War. This closure cut an important export route for Kirkuk crude to Mediterranean terminals at Banias in Syria and Tripoli in Lebanon. Syria and Iraq also agreed to consider building a second, 1.4-MMBD-capacity oil export pipeline. Under U.N. sanctions, Iraq is allowed to export oil only via Turkey or the Persian Gulf oil terminal of Mina al-Bakr.

When operational, between 450,000-600,000 bbl/d of Iraqi crude was exported to European markets through the Banias line, with the rest feeding Syria's Banias and Homs refineries and Lebanon's smaller Tripoli refinery. Since the closure, Syria has used the line to transport 360,000-bbl/d of its own crude output from the Dair al-Zur area to the Banias export terminal. In addition, a 60-mile stretch of the line has been converted by Syria to carry natural gas (to the fertilizer complex and refinery at Homs). Other constraints on using this line for Iraqi exports include: limited oil storage facilities at Banias; corrosion damage to unused portions of the pipeline in Syria; and the need for U.N. approval.

Following the 1982 Banias line closure, Saudi Arabia agreed to allow Iraq to export 500,000 bbl/d of crude through the Saudi Petroline to the Red Sea. Then, between 1983 and 1988, two Iraqi pipelines across Saudi Arabia (IPSA-1 and IPSA-2) were built. The first phase -- from Rumaila to the Petroline's PS3 pumping station -- was completed in 1985, when the second phase IPSA-2 project was begun. IPSA-2 included construction of a 1.65-million-bbl/d capacity line running parallel to the Petroline, an additional pumping station to boost IPSA-1's capacity to 1.65 MMBD, storage facilities, and a new Red Sea terminal. Iraqi crude began flowing through the IPSA lines in January 1990. Following Iraq's invasion of Kuwait in August 1990, Saudi Arabia closed the IPSA link, which now apparently has been emptied of oil and filled with water for maintenance.

In order to optimize export capabilities, Iraq constructed a reversible, 1.4-MMBD "Strategic Pipeline" in 1975. This pipeline consists of two parallel 700,000 bbl/d lines. The system allows for export of northern Kirkuk crude from the Persian Gulf and for southern Rumaila crudes to be shipped through Turkey. During the Gulf War, the Strategic Pipeline was disabled after the K-3 pumping station at Haditha as well as four additional southern pumping stations were destroyed. According to Petroleum Intelligence Weekly (PIW), 7 tanks at K-3 were blown up in the Gulf War, leaving only two tanks with combined capacity of 300,000 barrels. PIW also reports that Iraq has said that at least five tanks of 150,000 barrels each would be need for proper batching. Under its post-sanction development plans, Iraq plans to add several new solar-powered pumping stations to boost the pipeline's overall capacity. Iraq also plans to expand the country's crude storage capabilities from 14 million barrels to 21-24 million barrels. Most of this work will center on the Fao tank farm.

Oil Export Terminals
In the Persian Gulf, Iraq has three tanker terminals: at Mina al-Bakr, Khor al-Amaya, and Khor al-Zubair. Iraq also has additional dry goods ports at Basrah and at Umm Qasr, which is being outfitted to accommodate crude tankers. Mina al-Bakr is Iraq's largest oil terminal, with four 400,000-bbl/d capacity berths capable of handling very large crude carriers (VLCCs). Iraq claims that Gulf War damage to Mina al-Bakr has been repaired in large part and that the terminal has a capacity as high as 1.2 MMBD. Other estimates indicate that Mina al-Bakr's capacity is only in the 600,000 bbl/d-800,000 bbl/d range due to a lack of crude stream separation facilities and unrepaired storage tanks. A full return to Mina al-Bakr's nameplate capacity apparently would require extensive infrastructure repairs. Mina al-Bakr also is constrained by a shortage of separation and storage facilities, most of which were destroyed in the Gulf War.

For years, navigation into Mina al-Bakr was impaired by mines and by Iraqi Oil Tankers Company's 155,000-Dwt (dead-weight tons) Ameriyah tanker, sunk during the Gulf War. Mina al-Bakr is capable of servicing smaller tankers, including a well-publicized trial loading by the 36,900-Dwt Kirkuk tanker in August 1996. While three channels allowing for unrestricted passage and safe navigation reportedly have been cleared, however, it is unknown whether Mina al-Bakr's underwater protection system can safely accommodate large volumes of VLCC traffic.

Iraq's Khor al-Amaya terminal was virtually destroyed in the Iran-Iraq War. Repairs were begun in 1993, and Iraq stated in 1995 that the terminal could load 600,000 bbl/d. Upon full completion of repairs, Iraq projects Khor al-Amaya's capacity will rise to 1.2 MMBD. Iraq's third terminal, Khor al-Zubair, is linked to the Umm Qasr port by a 30-mile long canal. While Khor al-Zubair generally handles dry goods, it has the capability to service small quantities of liquefied petroleum gas (LPG) and refined products. Like Umm Qasr, Khor al-Zubair is being outfitted with crude loading capabilities.

Refining
Iraq's current refining capacity is believed to be around 350,000 bbl/d (although the Iraqis claim 700,000 bbl/d), compared to a pre-Gulf War, nameplate capacity of 700,000 bbl/d. Iraq has 10 refineries and topping units. The largest are the 150,000-bbl/d Baiji North, 140,000-bbl/d Baiji Salaheddin, 126,000-bbl/d Basrah, and 100,000-bbl/d Daura plants. During the Gulf War, both of the Baiji plants in northern Iraq as well as the refineries at Basrah, Daura, and Nasiriyah were severely damaged. This cut Iraq's refining capacity to around 60,000 bbl/d in March 1991. While much of Iraq's refinery capacity appears to have been restored by 1993, several of the smaller refineries, namely the 27,000-bbl/d Kirkuk and the 27,000-bbl/d Nasiriyah plants, were cannibalized for parts to repair damage at Baiji, Basrah, and Daura, which was expanded in 1994. In addition, even though total capacity now approaches pre-1991 levels, refining depth has been severely reduced, and due to rising demand, Iraq has been forced to utilize some of its stocks. A lack of light-end products, low quality gasoline, and rising pollution levels because of a lack of water treatment facilities are some problems now faced by Iraq's downstream sector. Post-sanction plans include attracting foreign investment to perform refinery upgrades and building a new $1-billion, 290,000-bbl/d "Central" refinery near Babylon.

Iraq's primary sources of associated gas are the Kirkuk, Ain Zalah, Butma, and Bai Hassan oil fields in northern Iraq as well as the North and South Rumaila and Zubair fields in the south. About 70% of Iraq's associated gas production capacity is located in southern part of the country. Gas flaring was reduced from roughly 50% in 1989 to under 5% in 1994. This was accomplished mainly through increased use of Iraq's two gas gathering systems, which were built in the 1980s. The Northern Area Gas Project started operation in 1983. It is able to recover and process up to 550 million cubic feet per day (Mmcf/d) of sour gas, with a resulting maximum output capacity of 300 Mmcf/d of dry gas as well as a mix of propane, butane, natural gasoline, and pure sulfur. The Southern Area Gas Project was completed in 1985, but was not brought online until February 1990. It has nine gathering stations and a larger processing capacity of 1.5 billion cubic feet per day. Gas gathered from the North and South Rumaila and Zubair fields is carried via pipeline to a 575-Mmcf/d natural gas liquids (NGL) fractionation plant in Zubair and a 100-Mmcf/d processing plant in Basrah. At Khor al-Zubair, a 17.5 million cubic foot LPG storage tank farm and loading terminals were added to the southern gas system in 1990. LPG export capacity was 4 million tons per year in 1990. In addition, Iraq built another system in 1985 to recover up to 200 Mmcf/d of gas from the Jambur field.

Iraq's only non-associated gas production is from the al-Anfal field in northern Iraq. Al-Anfal was brought online in 1990 with output of 200 Mmcf/d. Al-Anfal production is piped to the Jambur gas processing station near the Kirkuk field, which is 20 miles away. Al-Anfal's gas resources are estimated at 4.5 Tcf, of which 1.8 Tcf is proven.

In March 1996, Iraq and Turkey signed an initial memorandum of understanding regarding a gas supply deal between the two countries. Their commitment towards this deal was reaffirmed publicly in December 1996 and May 1997. The $2.7 billion project will involve building of an 855-mile, 350 Bcf annual capacity gas export pipeline linking northern Iraq to Turkey's Anatolia region. The proposed pipeline will have two compressor stations. Gas will be supplied from five non-associated gas fields in northern Iraq with a combined reserves of 9.5 Tcf. These fields comprise al-Anfal (1.8 Tcf), Chemchemal (2.1 Tcf), Jeria Pika (0.9 Tcf), Khashim al-Ahmar (1.4 Tcf), and Mansuriyah (3.3 Tcf). Plans call for development work at al-Anfal and Mansuriyah to tapped first, followed by other fields where more limited exploration work has occurred. During the first three years following start-up, targeted gas export levels will be 200 Mmcf/d, 345 Mmcf/d, and 1 Bcf/d, respectively.

Of the project's anticipated $2.8 billion cost, $1.8 billion will be for field development and pipeline construction work inside Iraq. Iraq is seeking foreign participation in the project and interest reportedly has been shown by Gas de France, BHP, TransCanada Pipelines, and other companies. At present, it is unclear how existing U.N. sanctions will affect foreign participation in this project. The $1-billion Turkish side of the project will involve Botas, TPAO, and Tekfen, which will be responsible for pipeline construction in Turkey.

COUNTRY OVERVIEW
Head of Government: Saddam Hussein al-Takriti
Deputy Prime Minister: Tariq 'Aziz
Independence: October 3, 1932
Population (October 1997E): 22.4 million
Location/Size: Middle East/168,709 square miles, slightly more than twice the size of Idaho.
Major Cities: Baghdad (capital), Basra, Mosul, Karbala, Kirkuk
Languages: Arabic, Kurdish
Ethnic Groups: Arab 75-80%, Kurdish 15-20%, Turkman, Assyrian, or other 5%
Religions: 97% Muslim (Shi'a 60-65%, Sunni 32-37%), Christian or other (3%)
Defense (2/98E): Iraq's active armed forces are estimated at 350,000, with reserves of 650,000. Iraq is believed to have 2,000 battle tanks and 300-350 aircraft (of which as few as 100 may be serviceable)

ECONOMIC OVERVIEW
Currency: Iraqi Dinar (ID)
Unofficial Exchange Rate (9/15/98E): US$1 = ID1,880
Gross Domestic Product (at market exchange rates) (1997E): $18 billion (one-third of 1989's economic output)
Real GDP Growth Rate (1998E): 15%
Inflation Rate (consumer prices) (1998E): 140%
Major Export Products (1998E): Crude oil and oil products (regulated by the United Nations)
Major Import Products (1998E): Food, medicine, consumer goods (regulated by the United Nations)
Merchandise Exports (1998E): $6.5 billion
Merchandise Imports (1998E): $4.7 billion
Merchandise Trade Balance (1998E): $1.8 billion
Current Account Balance (1998E): -$515 million
Oil Export Revenues/Total Export Revenues (pre-1990): 95%
Total External Debt (1998E): $126 billion (Iraq also owes $7 billion to Russia for past arms deliveries)

ENERGY OVERVIEW
Minister of Oil: Lt. Gen. 'Amir Muhammad Rashid
Proven Oil Reserves (1/1/98E): 112.5 billion barrels
Crude Oil Production (January-August 1998 estimated average): 2.0 million barrels per day (MMBD), of which nearly all is crude oil
Crude Oil Production (10/98E): 2.6 MMBD (according to Iraq)
Oil Production Capacity (1998E): 2.6 MMBD
Projected Post-Sanction Oil Production Capacity (1998E): Iraq plans 3 MMBD within 1 year after the lifting of U.N. sanctions; 3.5 MMBD in 3-5 years; 6 MMBD within 10 years
Oil Export Capacity (1998E): 1.4-2.4 MMBD (0.8-1.6 MMBD through the Kirkuk-Ceyhan pipeline; 0.6-0.8 MMBD through the port of Mina al-Bakr)
Oil Consumption (1998E): 600,000 barrels per day (bbl/d)
Net Oil Exports (1/98-8/98 estimated average): 1.4 MMBD
(10/98E): 1.8-2.0 MMBD
U.S. Oil Imports from Iraq (7/98E): 277,000 bbl/d (8/98E):713,000 bbl/d (according to the Middle East Ecoomic Survey, Exxon -- 175,000 bbl/d; Chevron -- 100,000 bbl/d; Clark -- 80,000 bbl/d; Amoco -- 50,000 bbl/d; Marathon -- 50,000 bbl/d; Valero -- 50,000 bbl/d; Mobil -- 45,000 bbl/d; Koch -- 40,000 bbl/d)
Crude Refining Capacity (12/22/97E): around 350,000 bbl/d (Iraq estimates 700,000 bbl/d as of May 1998)
Natural Gas Reserves (1/1/98E): 109.8 trillion cubic feet (Tcf)
Natural Gas Production (1997E): 128 billion cubic feet (Bcf)
Natural Gas Consumption (1997E): 128 Bcf
Electricity Generation Capacity (1998E): 4 gigawatts
Electricity Production (1996E): 27.6 billion kilowatthours

ENVIRONMENT OVERVIEW
Total Energy Consumption (1996E): 1.19 quadrillion Btu
Energy Consumption per Capita (1996E): 57.5 million Btu (vs. 351.9 million Btu in U.S.)
Energy-related Carbon Emissions (1996E): 21.1 metric tons (0.3% of total world carbon emissions)
Carbon Emissions per Capita (1996E): 1.0 metric tons (vs. 5.5 metric tons in U.S.)
Major Environmental Issues: Draining of inhabited marsh areas in the south; inadequate supplies of potable water; development of Tigris-Euphrates Rivers system contingent upon agreements with Turkey, which holds upstream rights; air and water pollution; soil degradation (salinization) and erosion; desertification

OIL AND GAS INDUSTRY
Major Companies: The Oil Ministry oversees the nationalized oil industry through the Iraq National Oil Company (INOC). Autonomous companies under INOC include the State Company for Oil Projects (SCOP) - design and engineering of upstream and downstream projects; Oil Exploration Company (OEC) - exploration; Northern Oil Company (NOC) and Southern Oil Company (SOC) - upstream activities in northern/central and southern Iraq, respectively; State Organization for Oil Marketing (SOMO) - crude oil sales and OPEC relations; Iraqi Oil Tankers Company (IOTC); and various departments within the Ministry of Oil which run Iraq's internal pipeline systems, distribute oil products, operate downstream natural gas/LPG projects and gas bottling plants.
Major Oil Fields (proven/probable reserves - billion barrels, 1998E): Majnoon (20), West Qurna (15), East Baghdad (11+), Kirkuk (10+), Rumaila (10+), Nahr Umar (6+), Halfaya (5), Zubair (4), Bai Hassan (2), Buzurgan (2), Khabbaz (2), Abu Ghirab (1.5), Nasiriya (2), Khormala (1.5)
Oil Refineries (effective nameplate capacity bbl/d, 1998E): Baiji North (150,000), Baiji Salaheddin (140,000), Basrah (126,000), Daura (100,000), Kirkuk (27,000), Nasiriyah (27,000), Haditha, Khanaqin/Alwand, Muftiah, Qayarah (Note: several smaller plants cannibalized for parts to repair larger refineries after Gulf War.)
Major Ports: Mina al-Bakr, Khor al-Maya, Khor al- Zubair, Umm Qasr
Major Pipelines (nameplate capacity): Kirkuk-Ceyhan (Dortyol) Pipeline - 0.8-1.6 MMBD; Iraq-Saudi Arabia Pipeline (IPSA1, 2) - 1.65 MMBD (Saudi section closed in 1990); Banias Pipeline - 1.1-1.4 MMBD (closed by Syria in 1983); Iraq Strategic Pipeline - 1.4 MMBD (reversible, internal transportation only)