Obstacles to pumping Iraqi oil

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MARCO WERMAN: Afghanistan is now the top military challenge facing the United States. It used to be Iraq and there's still plenty of violence there. But not enough to keep big oil companies from investing in the country. That means Iraq's oil output could grow significantly over the next few years. One Iraqi official recently predicted it could reach 12 billion barrels a day, on par with top exporter Saudi Arabia. But such a figure strikes some industry experts as over-ambitious, given the many problems still confronting Iraq. Here's more from reporter Susannah George.

SUSANNAH GEORGE: Security, political instability and poor infrastructure have concerned oil investors in Iraq since the country formally opened its fields to foreign investment in June of last year. But Iraq's above-ground drawbacks have not kept investors away from tapping into the country's below-ground riches. To counter security concerns oil investors hire teams of security contractors, build highly fortified compounds around their infrastructure and generally try to keep the Iraqi communities living near their oil fields happy. At a recent meeting at Baghdad's oil ministry Qian Mingyang of China's state owned CNPC, one of the largest investors in Iraq's oil, said that community outreach is an important part of his company's operations in Iraq.

QIAN MINGYANG: If the society builds the trust then the corporation will have a better condition.

GEORGE: Investors build that trust between local Iraqis by consulting tribal leaders, hiring locals and donating money for projects like schools and hospitals. But while oil companies can take steps to mitigate security risks, there is little to nothing they can do about Iraq's current political vacuum. Iraq has now entered its eighth month without a government and recent political developments appear to have widened the rift between Sunni and Shia leaders. Ruba Husari is an oil analyst based in Baghdad. She says that in the absence of a government, the oil companies are getting nervous.

RUBA HUSARI: Because Iraq is in the process of rebuilding its institutions in a way different from what existed before and because we are in this transitional phase where democracy is not yet well enshrined, and so on, there is no leadership. There is this void which created, there is no accountability. If companies are putting their money in, they want to see more accountability.

GEORGE: Whether or not the security situation in Iraq improves and whether or not a functional government is formed, Iraq still needs the roads, trucks, pipelines, and boats to get Iraqi crude out of the country and on to the market. And the majority of that crude will leave Iraq through two ports in Um Qasr and Basra, in the south. Captain Andrew Betton is the commander of Task Group Iraqi Maritime. He says that improving infrastructure is a priority for the joint American and British advising and training mission in Basra.

ANDREW BETTON: They're expanding the infrastructure that provides the oil to the platform, laying new pipelines, so looking to at least double, potentially triple, the volume of oil that is exported.

GEORGE: That would give Iraq's budget a significant boost. Haider al Aabadi is a prominent Iraqi politician and the former head of the Iraqi Parliament's economic committee.

HAIDER AL AABADI: There's a perception for now, Iraq is insecure. You have to fight that, I think that there is a very, very bright future in the country.

GEORGE: Al Aabadi recognizes that Iraq's oil industry still has a tough road ahead. But he says the fact that oil companies know the risks, yet still come to Iraq to invest, that makes him optimistic. For The World, I'm Susannah George.