IRAQI OIL MINISTER'S FAILED RAID ON SOUTH OIL

C O N F I D E N T I A L BAGHDAD 002902

SIPDIS

USDOE FOR PERSON

E.O. 12958: DECL: 08/28/2018
TAGS: EPET ENRG EINV PGOV IZ
SUBJECT: IRAQI OIL MINISTER'S FAILED RAID ON SOUTH OIL
COMPANY

Classified By: Economic Counselor Michael Dodman, reasons 1.4(b,d)


1. (SBU) In a September 4 decision, Oil Minister Shahristani
appointed Jabbar al-Luaibi to a new position within the
Ministry of Oil that will oversee the new Maysan Oil Company,
the South Gas Company, and the South Oil Company, rather than
simply reinstating him to his old position as director
general of South Oil (SOC). This undoes a mid-May decision
that not only removed Jabbar, but also the heads of the South
Gas Company and the Iraqi Oil Tankers Company in a move that
was widely seen as an attempt to reassert Ministry of Oil
(MoO) control over key MoO operating companies controlling
the flow of oil from southern oil fields and over the natives
of Basra heading the companies. Jabbar refused to relocate
to Baghdad, as required by his appointment as an MoO advisor,
staying in place and continue to exert control over his
former SOC deputies. Shahristani made another move to weaken
Jabbar's control with a July 21 decree establishing the
Maysan Oil Company, carving the Maysan oil fields from SOC's
assets.


2. (SBU) In an August 13 decree, Shahristani had appointed
Ali Ma'arij Suwayda as the acting director general for Maysan
Oil and filled other positions within the organization,
including appointing two deputy directors general. Although
the July 21 decree provided for a transitional period
continuing SOC control over Maysan Oil, the new company would
need to develop a cooperative relationship with SOC, since
SOC controls and operates the distribution and other
infrastructure that Maysan Oil would employ. Nevertheless,
Maysan Oil appears to be up and running. In late August, PRT
Maysan's oil and gas advisor met with Maysan Oil Deputy
Director General Adnan Nushi Sajit and a provincial oil and
gas official during which Sajit appealed for PRT assistance,
inter alia, in identifying drilling contractors, maintenance
of a 28-inch crude oil pipeline to Basra, and construction of
second crude oil pipeline to Basra.


3. (SBU) In conversations in Baghdad, MoO staff generally
approved of Shahristani's decision to establish Maysan Oil,
although they also strongly opposed any move to divide up
SOC's assets further, as has been rumored might happen.
Suwayda was viewed as technically competent and a good
manager, as were others on his staff. Their formal
appointment was likely to take several months, extending into

2009. MoO was developing an economic and financial plan, as
well as production plans, for the new company that were to be
completed in September. Plans were also underway to provide
additional drilling rigs, since only one rig was currently
operational for drilling and work-overs both. (Note:
According to our information, the following fields are
located in Maysan Province: Abu Ghurab, Jabal Fauqi, Huwaiza,
Buzurgan, al-Halfaya, Noor, Amara, and Rafae. The first
three fields cross into Iranian territory.)


4. (C) Comment: While we still do not know the back-room
political maneuvering that resulted in Jabbar's elevation,
the decision is a clear setback for Shahristani. It likely
reflects Jabbar's strong power base in Basra (SOC workers
went on strike and demonstrated on his behalf) and the
strength of his connections to the Fadhila political party.
Jabbar's return to the helm, however, removes uncertainty
regarding SOC's future (which is good news regarding Shell
Oil's plans to collect and market natural gas from SOC
fields, reftel) and his control over the three operating
companies in the south could lead to operational efficiencies
and better coordination.

CROCKER