'It will be difficult to reach the targeted production, but not impossible. There is no official modification yet but given the problems with security, we will be satisfied if we can maintain output at the present levels,' says Stinson.

According to Stinson, average oil production - mostly from fields operated by South Oil Company- stands at about 2.5 million b/d, of which 1.85 million b/d is exported. The rising number of attacks against contractors has slowed progress on many field rehabilitation projects that fall under the Restore Iraq Oil (RIO) programmes managed by Kellogg Brown & Rootand Parsons International, both of the US. 'It would help if we could put all the water we require into the wells for the water injection programme. But work on the Rumaila field and some other key projects has fallen behind schedule,' says Stinson.

Exports from the Basra Oil Terminal and the recently reopened Khor al-Amaya facilities were halted in late April after attempted attacks. There is growing pressure on foreign contractors working in the sector to halt operations until the levels of violence subside. Stinson says: 'We can't force contractors to stay on the ground. Most have taken a conservative approach to operations. However, a couple of prospective contractors have said they are unable to mobilise given the present security threat.'

Stinson says the restructuring of the industry remains on course. Under a CPA plan, the existing structure of 14 state-owned oil companies would be amalgamated into a giant corporation similar in shape to Saudi Aramco. 'We are still in deep discussions on restructuring the sector, but the expectation is that the present state-owned companies will be rolled into one entity,' he says.

In response to a shortage of working capital, the ministry has expressed a willingness to barter fuel oil at a discount in return for assistance with key projects and procurement needs. State Company for Oil Projects (SCOP)has issued tenders for a number of major field expansions and refinery upgrades which have no funding guarantees. But Stinson cautions: 'We have tended to discourage the ministry from doing this as they are bartering valuable products for a minimal return. There are also legal issues to do with the transparency of such deals that are of concern.'