NINEWA'S FUEL CRISIS -- EASED BUT STILL SEVERE

C O N F I D E N T I A L SECTION 01 OF 02 BAGHDAD 001850 SIPDIS SIPDIS E.O. 12958: DECL: 06/03/2017 TAGS: EPET ECON PGOV SY TU IZ SUBJECT: NINEWA'S FUEL CRISIS -- EASED BUT STILL SEVERE REF: A. (A) BAGHDAD 00775 ¶B. (B) ANKARA 01034 Classified By: Ninewa PRT Team Leader James Knight: 1.4 (B) and (D) This is a Ninewa Provincial Reconstruction Team (PRT) message. -------------- Summary -------------- ¶1. (C) The Manager of the Northern Oil Distribution Company, Mohammed al-Zibari, reports that up to 40 per cent of Ninewa's fuel needs are now being met by fuel deliveries from Bayji refinery. New fuel contracts with Syria and Turkey are pending; renewed deliveries from those countries are required to meet Ninewa's needs fully, at least through the medium term. Per al-Zibari, fuel contracts with Turkish companies are still awaiting Minister of Oil signatures in Baghdad. End summary. -------------- More fuel flowing . . . -------------- ¶2. (C) Team Leader Knight, joined by other Ninewa PRT members and 4-1 HBCT representatives. met al- Zibari at his Dahuk offices 15 May to review fuel supply and distribution issues in Ninewa, especially current fuel deliveries from Bayji refinery relative to normal Ninewa demand. Al-Zibari noted that fuel deliveries for Ninewa had risen from approximately 10-12 per cent of normal demand in March to 30-40 per cent in May, owing to improved security conditions at Bayji refinery and new contracts and security arrangements for fuel trucks making deliveries to Mosul. ¶3. (C) When asked by Team Leader Knight to clarify current arrangements for contracting with fuel truck companies, al-Zibari explained that at this point both he and the relevant Governor sign contracts with truck transportation companies selected by the Governor. Payments are made from Ministry of Oil accounts maintained by his office (the Northern Oil Distribution Company) upon presentation of invoices by contractors after deliveries to fuel distribution centers are made. -------------- . . . but imports still needed -------------- ¶4. (C) Al-Zibari affirmed that renewed fuel imports from Turkey and Syria are necessary to meet Ninewa demand fully. He confirmed that arrears owed to Turkish companies have now been paid. New contracts for fuel imports from Turkey have been prepared, but are still awaiting signature by the Minister of Oil. Similarly, al-Zibari's proposal to sell Bayji's large stock of heavy fuel oil (HFO) at a substantial discount has not been acted upon. (Note: 48 per cent of Bayji's refined product is HFO; moving the accumulated stock from Bayji is essential to maintaining normal fuel production levels there. End note.) ¶5. (C) Al-Zibari believes that ongoing suspension of fuel deliveries from Syria is the result of a political decision made in Damascus; he believes the refusal of Syrian fuel truck drivers to enter Iraq is because of that decision rather than security conditions in western Ninewa. When asked about the status of fuel exports to Syria from the Ayn Zalah field (Tal'Afar District),al-Zibari confirmed that up to 14,000 barrels per day are pumped to Syria via the Sufayah pumping station. This flow has been maintained since 2003. Al-Zibari believes that electricity is in fact imported from Syria in return for Ayn Zalah's oil, but that this power does not enter the national electricity grid and therefore is not reflected in Ministry of Electricity or Mosul's Directorate-General for Electrical Distribution records. -------------- Comment -------------- ¶6. (C) Al-Zibari's account of lack of progress on new fuel contracts with Turkey corroborates Embassy BAGHDAD 00001850 002 OF 002 Ankara reporting on Iraq's State Oil Marketing Organization (SOMO) negotiations in Turkey 16-18 April (reftel B). Al-Zibari's clarification of current modalities for fuel delivery contracts for Bayji refinery -- especially the role of provincial governors -- also appears correct given reports from Ninewa's Governor and other parties engaged in fuel deliveries from the refinery. However, we have been unable to confirm his assertion that electrical imports from Syria continue. We will seek to clarify this matter with our partner maneuver commands. ¶7. (C) Comment continued: While the Coalition effort to expedite Bayji Refinery operations and fuel deliveries to Ninewa (and other northern provinces) have taken the edge off Ninewa's energy crisis, fuel supplies remain insufficient for normal economic activity -- especially for Ninewa's factories and farms. Inaction at the Ministry of Oil again appears to be the major factor maintaining this crisis -- in this instance by sitting on pending contracts with Turkish fuel suppliers and failing to pursue fuel imports from Syria. End comment. CROCKER