SOUTH OIL COMPANY CHIEF PESSIMISTIC, BUT COMMITTED TO A

C O N F I D E N T I A L BASRAH 000069 SIPDIS SIPDIS E.O. 12958: DECL: 5/6/2016 TAGS: ECON ETRD ENRG EINV PGOV IZ SUBJECT: SOUTH OIL COMPANY CHIEF PESSIMISTIC, BUT COMMITTED TO A BETTER FUTURE REF: (A) BASRAH 38 (B) BASRAH 45 CLASSIFIED BY: Ken Gross, Regional Coordinator, REO Basrah, State Department. REASON: 1.4 (b),(d) ¶1. (C) On May 4, Regional Coordinator (RC),Deputy RC and Poloff met with South Oil Company (SOC) General Manager Jabbar Ali Husayn al-Lu'aybi at the Regional Embassy Office (REO) as part of an ongoing dialogue. Looking visibly tired, Jabbar started the meeting on a positive note and confirmed reports that oil production for April had increased to 1.91 million barrels per day (MBPD). He also stated that his goal was to reach 2.00 MBPD. However, he was pessimistic about the chances for a dramatic improvement in oil production in the next few years unless the Ministry of Oil (MoO) institutes reforms. ¶2. (C) In previous meetings with al-Lu'aybi, he stressed the need for reform at the MoO and the importance of a technocrat leading the MoO (see Ref B). Al-Lu'aybi said reforms must be implemented for the SOC to build greater production capacity. He reiterated that if he were adequately resourced by the MoO and the oil sector were allowed to function as is normal in other countries, the SOC could dramatically improve production capacity. Al-Lu'aybi described the bureaucratic morass standing in the way of replacing needed essential equipment - permission must be granted by the MoO for even the simplest purchase since his purchasing authority is limited to approximately USD 25. The time lag in buying desperately need spare parts easily can reach a year, and Al-Lu'aybi added, "People in Baghdad don't give a damn." ¶3. (C) The RC asked al-Lu'aybi for his opinion as to who would become the Minister of Oil. He quickly declined to offer any comment stating that he is an oilman, a technocrat who stays away from politics as much as possible. When asked if he would be willing to assume a position of authority in the MoO, Al Lu'aybi paused and commented that he would do so if he would have the freedom to implement necessary reforms. ¶4. (C) Comment: Al Lu'aybi continues to express his frustration with the MoO and the SOC's lack of authority and resources needed to enable it to operate to its full potential. However, although pessimistic, he was proud of SOC's increased oil production for the month of April. The formation of the new government in Baghdad and the appointment of a new team at the MoO make this a critical time for al-Lu'aybi - if the right people are installed at the MoO, those would run the ministry like a business instead of a political fiefdom, he believes SOC can become a company whose profits can enrich the people of Iraq. Al Lu'aybi is feeling the strain of being beholden to political masters that do not understand business, but he also clearly enjoys what he is doing, is good at it and is committed to doing his best towards making the SOC an oil giant. End Comment. GROSS