Summary
Content
The UNJLC Iraq Fuel Bulletin aims to provide a clear and concise periodic overview – usually weekly – of the situation as it exists in Iraq with regards to the oil industry. It focuses on the availability of fuels, particularly as they affect the welfare of the populace and related humanitarian work. It further seeks to identify major issues for the humanitarian community and other interested parties, to provide relevant background and constructive recommendations on current issues, and to alert responsible parties to emerging issues in the crisis so that they may be addressed in good time. The UNJLC Iraq Fuel Planning Team presently has dedicated representatives in Baghdad, Basra and Erbil. For further information please contacted info@unjlc.org.
Contact details for all UNJLC offices are available here.
- OVERVIEW
- Production, exports and imports
- Security and smuggling
- Infrastructure
- Refining
- Gasoline
- Liquid Petroleum Gas (LPG)
- Diesel
- Kerosene
Production, exports and imports
Total national crude oil production now exceeds 850,000 barrels per day. Production in the south has increased in the past fortnight to about 40% of total national production. This is expected to increase further in July following the commencement of crude exports from the offshore Mina Al-Bakr Oil Terminal. To date, southern area production has been constrained by limited storage facilities and damage to most of the area’s gas-oil separation plants. Significantly, the increased production will generate more gas and should assist the LPG supply situation. Oil production in the north is roughly in line with the Ministry of Oil’s mid-June target.
Security and smuggling
These twin and often related concerns continue to plague the ability of the local industry to meet domestic needs. On the security side, infrastructure repairs are often hampered or prevented outright by concerns for the safety of contractors and their local staff. Unless secured properly, recently installed repairs are likely to be looted. Law and order barely exists in places. There is little evidence of effective deployment of Coalition forces on several key borders to interdict smuggling, including such crucial places such as the Kuwaiti border, the Jordanian border at Trebil and the crossing to Syria at Al-Waleed. Smuggling is rampant, particularly to Syria, Jordan and through small ports on waterways leading to the Arabian Gulf. No reliable estimates are available of the quantities involved but they are large enough to adversely affect local supply. In addition to removing badly-needed supplies from the local market, smuggling removes trucks from the regional distribution network for humanitarian and regular commercial supplies. This is affecting the ability of humanitarian organizations to move supplies as truckers from Jordan and Syria carrying aid into Iraq backload with smuggled oil products and increase their cycle time, and as more Iraqi trucks are taken out of legitimate trade. This also increases, quite unnecessarily, the need for imports.
Infrastructure
Production, refining and distribution capacity continues to be limited by the dilapidated state of the industry’s infrastructure and shortage of spares and supplies, combined with the effects of the security situation. Nevertheless, sufficient progress has been made by Iraqi companies within the industry and OCPA contractors to have oil export facilities operational by the end of the month. UNJLC in association with other elements of the UN, and in co-operation with OCPA, continues to focus significant effort on facilitating the delivery of much-needed spares, materials, equipment and chemicals acquired by Iraqi under the Oil-For-Food Programme.
Refining
Stability of power supply is a major concern, especially at the Basrah refinery, with risk of serious damage to the refinery should this continue. The interruptions are caused by looting and even deliberate sabotage of the national power grid. It is unreasonable to expect that stability will be restored until at least the autumn, if not beyond. Alternative means of providing power through generators at the refineries will be necessary.
About two-thirds of gasoline production comes from the country’s largest refinery at Baiji, north of Baghdad with the remainder split roughly evenly between Daura, near Baghdad, and Basrah. A major planned maintenance phase that would have taken Baiji offline has been deferred until August and September. Production at Baiji is about four-fifths of the Ministry’s plan for June; the other two refineries are between 70% and 80% of target.
Gasoline
Production of gasoline continues to be maintained at marginally above half of total daily demand of about 15 million litres. However, distribution is uneven and this is encouraging a thriving and completely open black market, particularly in Baghdad, the central governorates and the south. This is exacerbated by a remarkably low ratio of petrol stations to consumers. Basra, for example, has only ten retail petrol outlets for a city of about 2 million; Baghdad has about 100 stations for 5 million people, with many drivers from nearby governorates traveling to the city for supplies, adding to both demand and congestion. The ubiquitous queues are as much a function of an inadequate pre-war distribution network as poor supply but are causing frustration, particularly when people queue for hours and supplies are exhausted before they are served.
Looking forward, increased crude production in July is likely to improve supply in the medium term and to eventually eliminate the black market. The imminent arrival in Iraq under the Oil-For-Food-Programme of large supplies of Tetra Ethylene Lead (TEL), a key additive in Iraqi gasoline production, should also help to increase supply.
Liquid Petroleum Gas (LPG)
Domestic supply of this primary domestic cooking fuel remains poor. Supply is also critical for hospitals, orphanages and other institutions. Presently, only about 20% of demand is being met from domestic production. Major plants are working at a very low capacity, if at all. Continued LPG imports may be necessary at least throughout the summer although the import of an average of 1700 tons per day through the country’s main LPG export port at Khor al-Zubayr should ease the situation. Much Coalition attention is being devoted to bringing the Khor Zubayr plant on line but it is unrealistic to expect that it will be on full production for quite some months.
About 50,000 12kg LPG gas bottles should enter Iraq each week under the Oil-for-Food Programme through to the end of the year. This will not only replace many of the old bottles from the estimated national inventory of 6 million bottles, but also relieve the supply situation.
Diesel
Diesel is used primarily in the transport industry but demand has increased with the needs of the harvest and more widespread use of generators for power. Although diesel is generally available, the Ministry of Oil expects that a shortage will occur and is reported to be planning to import between 100 to 150 million litres. Smuggling continues to be a huge problem, moreso for diesel than for other fuels. Clearly, bringing this under control would greatly assist the supply situation and reduce the need for imports.
Kerosene
The Ministry’s policy is to build up the kerosene inventory in preparation for the winter season but this will be more difficult as the population is now using kerosene as an alternative – although more dangerous – alternative to LPG for cooking. At present, at least one refinery is blending its kerosene production with diesel. There are consistent reports of widespread wood-cutting for cooking fuel. This may have adverse environmental effects in more arid areas.
ABOUT UNJLC
UNJLC is an inter-agency facility reporting to the Humanitarian Coordinator for Iraq and generally to the Inter Agency Standing Committee. Its mandate is to coordinate and optimise logistics capabilities of humanitarian organisations in large scale emergencies. UNJLC operates under the custodianship of WFP that is responsible for the administrative and financial management of the unit. UNJLC is funded from voluntary contributions that are channeled through WFP. The UNJLC project document for Iraq can be viewed at the UNJLC website (www.unjlc.org).