The injection of almost $5,000 million in foreign and government funding has until now been the only reason the country remains able to continue to export oil. But the cash is rapidly running out. And future funding will not be forthcoming until the political and security situations are resolved.

While the spotlight has fallen mainly on the spate of attacks that continue to plague the oil and gas infrastructure, it has also become apparent that the condition of the existing infrastructure is just as great an obstacle to the reconstruction effort. Work teams from prime contractors are finding that, rather than concentrating on work to boost capacity, they are having to spend vast amounts of time and effort simply fixing or replacing existing units. Years of under-investment, combined with sabotage, looting and war damage, have meant that although the sector has a nominal capacity of up to 2.8 million b/d, the condition of facilities makes this figure only achievable in the most favourable of circumstances.

As the transitional government begins to assert control, the Oil Ministry is becoming the de facto authority in charge of the sector. It has a four-pronged strategy focusing on improving security, increasing refinery capacity, developing crude output capacity and developing a master gas network as it seeks to reach its stated aim of 3 million b/d by the summer. 'We are concentrating at the same time on these four key areas,' says a senior ministry official. 'Each one is an urgent priority. If we want to hit 6 million b/d eventually, which is our long-term plan, we can't afford to ignore any of them.'

Security

The problem is that the two operational export pipelines - from Kirkuk to Ceyhan and from Basra to the southern export terminals - pass through long stretches of sparsely inhabited desert, making their defence difficult, if not impossible. In recent months, the northern export pipeline has been offline more often than it has been operational.

The ministry is working on the installation of advanced telemetry systems for the pipelines to greatly improve identification of problems with the system. It is also working closely with the US on aerial surveillance systems and the establishment of a rapid reaction force to deal with ruptures as soon as they occur.

Increasing refining capacity is the second priority. Despite a nameplate capacity of more than 650,000 b/d, the eight working refineries struggle to produce more than 500,000 b/d. This was more than sufficient during the Baathist regime, but the sudden increase in vehicle use, combined with soaring power demand, has highlighted the refining industry's deficiencies. Baghdad is having to spend up to $200 million a month importing refined products, mainly from Kuwait, and has been compelled to make a decision to increase refining capacity.

'We intend to tender in the summer two contracts for the construction of two grassroots refineries in the central region near Baghdad,' says the official. 'The first refinery, with capacity of 440,000 b/d, will be tendered on an EPC [engineering, procurement and construction] basis, financed directly from the ministry's budget. The second facility will have a capacity of 200,000-300,000 b/d. We are in talks with international contractors and developers on the possibility of developing the refinery on a build-own-operate