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Global Intelligence, Stratfor, March 28, 2008

Iraq: Clashes Hit Oil Export Capability

Summary

A major crude export pipeline in the Iraqi region of Basra was bombed March 27. Unless Iraqi authorities move quickly in repairing the pipeline and improving Basra’s security situation, Iraq’s only source of income could suffer severe damage.

Analysis

The Zubair-1 crude oil export pipeline in Basra in southern Iraq was bombed March 27, and as a result of the blast and fire, the main pumping station was shut down. The Zubair-1 pipeline transports crude oil to tanks at Iraq’s two exporting terminals on the Persian Gulf. Iraqi oil officials said March 27 that exports from Basra will return to normal levels later in the day. Earlier, a Southern Oil Co. official said it would take three days to repair the pipeline.

Ninety percent of Iraqi crude is exported through the Basra infrastructure. The production and movement of oil will be cut by roughly one-third until the Zubair-1 pipeline is repaired. The damage will take exports from about 1.54 million barrels per day down to 1.016 million. Therefore, Iraqi authorities will need to move quickly on both the repair and security fronts to prevent any further disruption of oil production and export.

Unlike the oil lines in the North, which pass directly through the often insurgent-wracked city of Baiji, the southern lines remain in the desert — bypassing Basra completely — before heading down the lightly populated Al Faw Peninsula to offshore loading platforms. This difference has helped insulate the South from attacks on infrastructure. But far more important is that most of the insurgency to date has been Sunni in nature and Baiji is a Sunni city. Basra, in comparison, is Shiite. However, the politics have shifted in recent weeks and now it is the Shia who are riled up and Basra is seeing its most severe security complications in years.

Operational pipelines in the south also have been shielded from attacks because the central government refrained from upsetting the balance of power in the area. However, the damage to the Zubair-1 pipeline is not surprising, given the ongoing security operation against Shiite militias and oil mafia in the Basra region. Unless the security situation is brought under control quickly, Iraq’s only source of income could take a severe hit.

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