NINEWA: FUEL CRISIS UPDATE

C O N F I D E N T I A L SECTION 01 OF 02 BAGHDAD 002729

SIPDIS

SIPDIS

E.O. 12958: DECL: 08/14/2017
TAGS: ECON EPET ENRG PGOV IZ
SUBJECT: NINEWA: FUEL CRISIS UPDATE

Classified By: Ninewa PRT Team Leader Jason Hyland: 1.4 (B) and (D)

This is a Ninewa Provincial Reconstruction Team (PRT) message.


1. (C) SUMMARY: PRT TL Hyland along with other PRT members
met August 8 with Northern Oil Company Distribution Director
Dr. Mohammed al-Zibari in his Dahuk offices for a lengthy
discussion of the energy crisis in Ninewa province. He
claimed the Bayji Oil Refinery,s current operations are
inefficient, corrupt and prevent the allocated fuel from
being distributed to the province. He proposed that Al Kisik
refinery could supply a significant portion of provincial
need. To do so, the Kirkuk field would need to supply the
refinery with crude. The consensus analysis is even running
at full capacity, domestic refining capacity could supply at
most 40% of Ninewa's demand and therefore fuel imports remain
critical for the province. Dr. al-Zibari said GOI must
allocate the funds for imports and then engage Turkey and
Syria for import negotiations. End Summary.

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Challenges at Bayji
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2. (C) All white market fuel products for Ninewa currently
come from the Bayji Oil Refinery via fuel trucks. TL Hyland
stressed to Dr. al-Zibari that the province needs to send
more trucks to take full advantage of Bayji. Dr. al-Zibari
responded that 50%-60% of the trucks sent now return empty
due to logistical challenges. After an August 1 meeting,
provincial and central GOI officials cleared up several of
these obstacles, such as limited loading hours. Dr.
al-Zibari gave the PRT Ministry of Oil (MOO) documents, from
after the August 1 meeting, showing a cut in Ninewa's
allocations by over 30% for all fuel products. Dr. al-Zibari
asserted this new allocation may better reflect the actual
production capacity of Bayji.


3. (C) MDN-N tracks the trucks from across the region
uploading fuel products at Bayji. According to MND-N's
analysis, Ninewa has never sent enough trucks to receive its
allocation. Though corruption continues, MDN-N is confident
that Ninewa could receive its entire allocation with the
proper number of trucks. If it were to do so, the extra fuel
would visibly reduce the fuel shortage.


4. (SBU) When TL Hyland asked Dr. al-Zibari if he
communicates these challenges to Ninewa Governor Kashmoula,
Dr. al-Zibari said he talks with him "three times a day." He
offered to host a meeting in his Dahuk offices with the
Governor, MND-N DCG/S Wiercinski, and TL Hyland to address
Ninewa energy issues. TL Hyland said he thought this was an
excellent idea and will propose it to the Governor. BG
Wiercinski supports this proposal. Dr. al-Zibari proposed
such a meeting could encompass the short term fuel products
challenges as well as longer term issues such as domestic
refineries, power plants, energy imports and the Mosul dam.

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Hamam al Alil: An Alternative to Trucks
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5. (SBU) Dr. al-Zibari said the MOO still has not executed
allocated funds for the repair of the Bayji-Hamam al Alil
pipeline. Additionally, coordination is required between MOO
and MOD in order to provide pipeline security. (Note: The
Hamam Al Alil fuel depot outside Mosul was recently and
completely renovated by CF and could be fully operational
were it receiving fuel. However, it is a pipeline-fed depot
and the pipeline from Bayji has several breaks preventing the
depot from operating as designed. End Note.) According to
the Provincial Director General of Oil, trucks occasionally
use the depot but at nowhere near its capacity.

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Al Kisik as Partial Fix
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6. (SBU) Dr. al-Zibari said the Al Kisik Oil Refinery in
Ninewa Province is currently capable of producing 7,000-8,000
barrels/day of refined fuel product. Al Kisik previously
received Kirkuk crude oil through the 46/40" export pipelines
to Turkey via Bayji. This resumed briefly in June 2007 but
Dr. al-Zibari claims the Bayji manager refused to allocate
crude to Al Kisik. Dr. al-Zibari volunteered a work around,
by which he would provide trucks to bring the crude directly
from Kirkuk but this awaits MOO authority to implement.


7. (SBU) Al Kisik could provide up to 25% of the province,s
requirements for diesel, in dire need in both the industrial
and agricultural sectors. As well, upwards of 90% of
Ninewa's consumer electrical power is fueled by diesel
generators. Dr. al-Zibari asked for USG support in urging
the MOO to provide him authorization to carry out this
operation.


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Even at Full Domestic Capacity, Imports Urgently Needed
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8. (C) Dr. al-Zibari said that 70% of Ninewa's fuel needs
must be met by imports. (Note: PRT-Ninewa and MND-N concur
with this analysis.) He noted that GOI support of fuel
imports for northern Iraq has decreased from over $100
million USD per month last year to nothing today. Dr.
al-Zibari asked our assistance in communicating the urgency
of this to the GOI and expressed hope that negotiations
between GOI, Turkey and Syria for fuel imports would occur as
soon as possible. He stressed that imports are critical to
meet the requirements for all forms of fuel. LPG in
particular is in critically short supply, with less than 10%
of Ninewa's need being met from internal sources.

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COMMENT
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9. (C) Dr. al-Zibari's bottom-line message about imports is
supported both by other contacts and macro analysis of
provincial and regional refining capacity. Even under
perfect conditions in refining and distribution, provincial
demand outstrips domestic capabilities. Direct cooperation
among the various Iraqi officials -- national, regional and
provincial -- could partially alleviate the crisis nature of
the fuel shortage. Without imports, it is difficult to
imagine any solution in the short- to medium-term being
sustainable. MDN-N and PRT-Ninewa are committed to
facilitating this process as much as necessary. END COMMENT.
CROCKER