Oil Industry Headlines: Week of September 14
Iraqi officials have not yet issued a formal confirmation, but media sources in Iraq are reporting that an attack has shut down one of Iraq’s key pipelines. According to United Press International, “a pre-dawn bomb ripped open the pipeline between Kirkuk and Baiji, sending oil into the Tigris River, forcing water pumps in Tikrit and Baiji to shut down and threatening the supply into Baghdad.”
This news highlights the dilemma faced by oil companies interested in developing the nation’s resources, which was recently featured in a Financial Times article. According to the FT, oil companies “can wait for the central government in Baghdad to agree to a new oil law that will give them a legal framework in which they can operate, and for the security situation to become manageable. Or they can press ahead and sign agreements with the Kurdistan Regional Government, the authority in the autonomous north of Iraq, at the risk of souring relations with Baghdad and shutting themselves out of deals in the rest of the country.” It’s becoming an increasingly tough choice. The Kurdistan Regional Government only controls three percent of the nation’s vast reserves, but at least those reserves are currently available. The remaining ninety-seven percent is tied up in sluggish legislation and tangled security issues that are likely to remain a concern for years to come.
As Ed Crooks and Sheila McNutty of the FT put it, “If the political situation in Iraq continues to deteriorate, there may come a time when the majors decide it is better to have 3 per cent of a large amount than 97 per cent of nothing.” Officials at PEMEX, Mexico’s state oil monopoly, continue to evaluate security risks in Mexico’s fuel pipelines. The latest in a series of attacks occurred on Monday, causing losses amounting to hundreds of millions of dollars in lost production. Jesus Reyes Heroles, the director of PEMEX, recently said “The truth of things is that a company with the characteristics and size of Petroleos Mexicanos… inevitably has vulnerabilities that are very difficult to eliminate,” Express News reported. Sean Mattson, Express-News’ Mexico correspondent added, “Pemex has starved its pipeline maintenance budget, since the government takes most of its profits and remaining revenues fund a scramble to replace diminishing oil reserves.” The United States depends heavily on Mexico, who is the our second largest supplier, as a stable source of oil and gas.
Published Thursday, September 20th, 2007 at 9:13 am and filed under Industry News.