Iraqi Oil Market Losing Billions

KIRKUK, Iraq – When Saddam Hussein's (search) lieutenant heard that an oil pipeline had been sabotaged in Qushqia, his order was swift: Blow up the village. Under Saddam, nobody messed with oil.

Saddam and his notorious lieutenant Ali Hassan al-Majid (search), or "Chemical Ali," are gone — both in U.S. custody facing trial for crimes allegedly committed during the former regime. But security around Iraq's vital petroleum industry is in crisis.

Between August and October, Iraq lost $7 billion dollars in potential revenues due to sabotage against the country's oil infrastructure, according to Assem Jihad, spokesman of the Oil Ministry.

An estimated 20 oil wells and pipelines were bombed or set abalze this month in northern Iraq alone, according to an official of the Northern Company. Iraq has oilfields in the north around Kirkuk and in the south near Basra.

Iraq's security crisis and its long, porous land borders left the country's petroleum industry with no effective protection against saboteurs — either Saddam loyalists or tribesmen competing for jobs with the British security firm Erinys International, which has a contract to secure oil wells and pipelines.

Maj. Gen. Anwar Mohammed Amin, chief of the Iraqi National Guardsmen (search) in Kirkuk, said that Erinys hires tribes to guard oil installations. For guarding pipelines, he said the going rate is $1,100 per mile secured.

"The tribes are fighting over who wins the largest number of contracts," Amin said, adding that the losers "blow up the pipelines and oil wells in retaliation."

Tribesmen who own land through which the pipelines pass sometimes break them to steal oil for sale.

"The company tried to make use of the tribal power but it failed," Amin added.

An official of the Northern Company, which runs the fields around Kirkuk, said the company has been reluctant to withhold payment if a tribe fails to secure a line "so the attacks are endless.

Erinys refused to meet with an Associated Press reporter to discuss security issues.

To make matters worse, some of the pipelines pass through areas where Sunni Arab insurgents are active. Some of the sabotage appears to have been part of a campaign to cut revenues to the U.S.-backed Iraqi government.

Amin said that since the collapse of Saddam's regime, Kirkuk pipelines and the wells have been attacked at least 74 times and "and to counter such a terrorist force, organized national forces are needed."

He said that firefighters, the oil engineers, and workers are reluctant to work out of fear of reprisals.

Sami Hadi, a 37-year old firefighter, said that unidentified people left a note in front of his house threatening to kill him if he continued fighting oil fires.

"I earn my living from this job and I can't quit," Hadi said.

The Northern Company official said that initially the favored target was oil pipelines but recently saboteurs were preferring to hit oil wells, which require more time and money to repair.

In the Khabbaza area, six out of 30 wells have been attacked even though they are located near the Northern Oil Company headquarters which supposedly has stringent security.

Amin said that 2,000 Iraqi National Guardsmen were deployed a week ago to Khabbaza as the first step toward replacing the tribesmen. Most of them were hired from the Kirkuk area but would be under the control of the guard instead of tribal leaders.