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| World Marketplace |
Shifting Economic Sands
By Jean-Francois Seznec
04/01/2004
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The northern fields have a capacity of 1.1 million barrels a day, but actual
production has been hampered by sabotage and attacks on the pipeline to Turkey
and to the refineries. As a consequence, actual production has been well below
800,000 barrels a day, and much of this is reinjected into the fields, at great
expense and danger to the integrity of the fields, for lack of export routes.
Kurdish groups are claiming the city of Kirkuk, which sits on the oil fields, as
their own. Should they get their way, Turkey, Syria and Iran are likely to
refuse any oil exports that could finance a Kurdish independence movement that
might spill over their borders. The IOCs have nothing to gain from investing in
the northern fields.
Before the war with Iran, Iraq was an important
regional manufacturer of petrochemicals and fertilizers, and there is no reason
it could not reappear as a major supplier of these and other energy-intensive
products, including direct reduction steel and aluminum. Iraq could also use its
energy resources to become an important producer of aluminum, emulating Bahrain,
which has the largest single aluminum plant in the world, producing 550,000 tons
a year. Both plants would be a boon to the south, but once again would leave out
the north. Aluminum would require access to cheap ore from Australia; direct
reduction steel, of which there is currently some production already in the
south, requires proximity to water.
Iraq still has four large fertilizer
plants and two petrochemical complexes, but the sanctions most likely left these
plants in disrepair. A major redevelopment of the petrochemicals industry will
require very substantial investments after oil production is fully
reestablished. Once oil products and natural gas are fully available, Iraq will
have one of the cheapest costs of raw material feedstock in the world. Cheap
feedstock could help Iraq become a major world producer of fertilizer and
petrochemicals. Saudi Arabia, which is part owner of one of the Iraqi
petrochemical complexes, can be a model and a source of capital. The Saudis have
spent more than $30 billion on their own petrochemical infrastructure, which has
made Saudi Arabian Basic Industries the 11th largest petrochemical company in
the world, producing 42 million tons of products per annum. Western and Japanese
companies are likely to invest in plants that take advantage of the cheap Iraqi
feedstocks for the manufacture of ethylene, propylene and their by-products.
These ventures will all have to be set up in the south simply to be close to the
source of cheap energy and the export markets.
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