Iraq oil products crisis deepens despite higher domestic output

Baghdad (Platts)--19Aug2005

Iraq's production of gasoline, gasoil and kerosene rose slightly in July
but the increase has done little to alleviate a severe products shortage,
which has worsened.
     Major cities including Baghdad are suffering from frequent power cuts in
temperatures above 50 Celsius and long lines at petrol pumps with black market
prices escalating sharply for the main so-called white products--gasoline,
gasoil and kerosene.
     Ministry of oil executives attribute the reason for the latest crisis to
lengthy power cuts, with power supply restricted most of the time to just four
hours in every 24 and forcing gasoline stations to use inefficient generators
that halt pumping intermittently, exacerbating the long waiting time at the
pump.
     The power outages have also led to a sharp rise in the demand for
gasoline and gasoil to operate the thousands of privately-owned household,
industrial and district generators.
     A senior official told Platts that the consumption of gasoline in Baghdad
alone had exceeded the 10-mil liters/day level, which is double the pre-war
rate. He estimated that the total demand for the country was approaching the
25.5-mil liter/day mark.
     However, the above reasons do not explain the current severe shortages in
the local supply of kerosene at a time when demand is low in the summer
months.
     The ministry official attributed this to a failure of the distribution
system to respond adequately to a temporary spike in demand, prompting an
alarmed public to start storing up for winter.
     The angry public reaction to this crisis has forced the ministry to take
some quick and unpopular decisions such as introducing new road measures by
spreading the number of cars allowed on the roads at any one time, as well as
well as declaring their intention to introduce a ration card system for
domestic fuels such as LPG and kerosene.
     This crisis has come at a time when the figures for July, as compiled and
tabulated by the ministry of oil and obtained by Platts, showed a slight
improvement in the production of the principal products compared to the rates
for June, although they are still hovering around 40-60% of the rates achieved
during 2002, the last full year before the war.
     The production rates for July were 2,150mt/day of LPG, 11.05-mil
liters/day of gasoline, 4.21-mil liters/day of kerosene and 13.65-mil
liters/day of gasoil.
     In addition to the domestic production, Iraq also imported some
2,310mt/day of LPG last month, as well as 13.2-mil liters/day of gasoline,
1.75-mil liters/day of kerosene and 6.5-mil liters/day of gasoil.
     Imports of refined products from Iran accounted for around 10% of the
total imports last month. Iraq and Iran signed a memorandum of understanding
in July under which Iraq is to supply up to 150,000 b/d of Basrah Light crude
to Iran's Abadan refinery in return for comparable quantities of refined
products via two new pipelines.
     The agreement with Iran has met with some objections both from within the
Iraqi oil industry and outside, with some officials questioning the efficacy
of exporting Iraqi oil to an oil-exporting country and building a system to
import oil products.
     The approval of the memorandum by Iraq's national assembly has been
postponed because the assembly is currently concentrating on the task of
drafting the new constitution for the country.

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