IRAQI ENERGY SECTOR STATUS ON ELECTION EVE

UNCLAS SECTION 01 OF 02 BAGHDAD 004998 SIPDIS SENSITIVE E.O. 12958: N/A TAGS: EPET ENRG ECON IZ SUBJECT: IRAQI ENERGY SECTOR STATUS ON ELECTION EVE REF: BAGHDAD 4851 SENSITIVE BUT UNCLASSIFIED - GOVERNMENT DISTRIBUTION ONLY NOT FOR INTERNET DISTRIBUTION ¶1. (SBU) SUMMARY: Electricity and fuel supplies in Iraq remain very limited. The GOI continues to have problems paying for imported fuel supplies from Kuwait and Turkey. The GOI again permitted arrears to Turkish and Kuwaiti fuel suppliers to mount with the former threatening a fuel shutoff. Partial payments on arrears of $600 million have been promised after the election. Al Fathah pipeline crossing construction across the Tigris is progressing, with pipelines now installed. These pipelines may be placed in service by late January 2006. Al Fathah upgrade will enable expansion of oil exports from northern Iraqi oil fields. END SUMMARY. -------------- FUEL STATUS -------------- ¶2. (SBU) Fuel supplies across Iraq remain short. The supply in Baghdad is still low, but improved from late November. Reported days of fuel supply in Baghdad are as follows: gasoline--2.7, kerosene--19.5, diesel--1.3, and LPG--2.7. Countrywide supplies, though quite unevenly distributed are as follows: gasoline--4.9, kerosene-- 7.1, diesel--3.3, and LPG--15.1. The most consistently supplied areas of the country are Baghdad, and Basrah. In the remainder of the country many fuel stations are intermittently empty of fuel between deliveries. The regions shortest on fuel supplies are Kurdistan, Anbar Province, and south-central Iraq. ¶3. (SBU) A verified report from a Civil Military Operations fuel officer said the local government in Al-Kut has issued a verbal and written statement to a fuel-supply trucking firm that they will commandeer all tankers coming through Al- Kut to Baghdad. Apparently the governor has requested more fuel from Baghdad and had been denied. Nationwide, black market prices for fuel remain five to ten times the official prices for all types of fuel, and fuel continues to be generally available from this source. -------------- FUEL PRICES -------------- ¶4. (SBU) Prices for fuel at gas stations in major cities in Iraq reflect the Ministry of Oil (MOO) increased price schedule. Anecdotal reporting from Baghdad, Basra, Kirkuk and Mosul indicate official government gas stations are pricing regular gasoline at $.13-$.15/gallon. These prices are somewhat lower than product prices expected by the IMF. However, Minister of Finance (MOF) evidently submitted new fuel prices as expected by the IMF without approval of the MOO. This issue went to the Prime Minister for decision. Deputy Minister of Finance Kamal Fields Al-Basry informed the Treasury Attach that the increases would go into effect on the date and in the amounts that the IMF expects. -------------- FUEL PAYMENTS STATUS -------------- ¶5. (SBU) The GOI continues to have problems paying for imported fuel supplies from Kuwait and Turkey. Turkish arrears are reported at $600 million and total bills exceed $800 million to Turkish firms. Dr. Radhwan, Finance Director General (DG) for Ministry of Oil (MOO),said the Ministry of Finance (MOF) is providing a greater allocation to the MOO/SOMO (State Oil Marketing Organization) for future fuel imports payments that may help reduce the monthly accumulation of arrears. He discussed the issue with MOF December 12 and said GOI should have the arrears payments to Kuwait and Turkey settled after the election. DG for SOMO and the Minister of Oil are both in Kuwait this week and will return on Wednesday, December 14. (NOTE: The government is shut down until Sunday, December ¶18. We do not expect any action to be initiated until that time. END NOTE) -------------- ELECTRICITY STATUS -------------- ¶6. (SBU) Baghdad's hours of power increased to 9 hours December 12 after two weeks at 4-5 hours a day, while Basra's hours of power step increased to 17 hours from 13 hours. Nationwide average hours of power increased to 13 hours. The rotation schedule was 2 ON/ 4 HRS OFF for Baghdad and for the rest of Iraq, 3 HRS ON/ 3 HRS OFF. 149 MWs of power were transferred from the South Region to the Central (Middle) Region. The North and West Regions sent 295 MW to the Central Region. The addition of the V.94 generator at Kirkuk to the grid also increased the power transfers from the North. This accounts for the slightly better power situation in Baghdad. Baghdad consumption was 23% of the nation's output. Iraq average MW availability was 3864 MWs. The 400 KV lines remain the weak links in the Iraqi grid. The Bayji to Baghdad lines are under repair, with one under stress, but still functioning and the other interdicted. The Bayji to Kirkuk line was repaired and then interdicted again on Dec 10. The Mussaib line to Baghdad was repaired on Dec 12. Repairs for the major lines from Bayji are scheduled for later in December. ¶7. (SBU) The shortfalls in electricity across Iraq are partially compensated by the presence of neighborhood and household generators. These generators of electricity are used to replace the power when the electricity is rotated from sector to sector in the large cities and in the rural areas. There are a reported 1-1.5 million small generators in Baghdad used at the household level. There are 10-12,000 neighborhood generators in Baghdad, which supply groups of houses and businesses with higher amperage replacement power when the grid power is switched off to their sector of town. -------------- AL FATHAH CROSSING -------------- ¶8. (SBU) The Al Fathah oil pipeline crossing is currently a good news story with the successful laying of the pipelines across the Tigris River. The tie-ins of the replacement pipelines along the Kirkuk to Bayji corridor are expected to be completed by the end of January 2006. These lines still need to be connected into the national pipeline network through connectors on the west side of the Tigris River. The completion of the tie-in of the pipelines will enable the production of crude oil in the Kirkuk oil fields to expand and the export of oil through the Iraq-Turkey pipeline to the port of Ceyhan on the Turkish coast.