The Blogiston Post

Politics, money, and war.

Tuesday, June 29

un-metered oil in iraq

Just reading the report from Christian Aid and would like to share a few details. Probably the most important is that Iraq's oil production IS NOT METERED. There is no way to account for how much oil has been produced and/or subsequently sold.

Some excerpts from the Christian Aid report:
What the statements don’t say

1. Oil revenues

What is clearly missing from the CPA’s figures is any indication of how the figure for oil revenues has been reached. The financial statement for the [Development Fund of Iraq] DFI of 29 May, for instance,says that $10 billion in oil income was deposited between the DFI’s inception at the end of May 2003 and the end of May 2004. Yet the CPA ‘Administrator’s Weekly Report’ of 28 May says oil revenue was $11.5 billion for the same period.

Christian Aid made its own detailed calculations, with the best oil production and price figures available from oil industry analysts, and came up with oil income figures ofbetween $11.8 billion and $13 billion to the end of May 2004 – a divergence of between $1.8 billion and $3 billion from the CPA’s figure of $10 billion –potentially a 30 per cent difference. How is anybody supposed to know which of these figures is the accurate one?
We at bpost did not know this:
At the end of April 2004, a CPA funding-allocation meeting (the Program Review Board– PRB) acknowledged that: ‘Metering for crude oil extraction and sales is presently nonexistent in Iraq.’

The minutes of the PRB go on to state that: ‘A critical step in restoring the Iraqi oil infrastructure is to provide a system to control accountability of crude oil and its products.

So, nearly a year after the CPA took over Iraq’s oil production and a year after the Security Council resolution that requires proper oversight of Iraq’s oil was passed, a body run by the CPA acknowledged the lack of accountability over Iraq’s oil.
Details in the footnotes:
12 The minutes of the IAMB meeting held in Kuwait on 17-18 March 2004, record: ‘The IAMB was informed that crude oil extraction is currently not metered. This precludes a reconciliation of all crude oil extracted with its eventual utilization and represents an internal control weakness which needs to beaddressed urgently. The IAMB was informed of the steps taken by the CPA to mitigate the consequences of such weakness and to curtail smuggling. The IAMB welcomed these interim steps and recommended the expeditious installation of metering equipment in accordance with standard oil industry practices.’

The minutes of the IAMB meeting, held in New York on 22-23 April 2004, say: ‘the IAMB has had an exchange of views with KPMG on various aspects of the audits, and in particular, on the issues related to the extraction of crude oil, in light of the lack of metering.’

13 Minutes of IAMB meeting on 24 and 25 May 2004. The IAMB remains concerned that these two metering contracts have been awarded as ‘Task Orders’ – ie add-ons to existing contracts [it doesn’t say which companies are involved] and that these existing contracts might have been awarded without competitive bidding. The CPA said it would provide further information to the IAMB.
Without competetive bidding. What a surprise. Keep reading...

Footnote 13 is in reference to:

On 24 and 25 May, the CPA told the IAMB that two contracts to install meters across Iraq have been issued, and that this will take 12 to 18 months. But the IAMB is so concerned about the potential losses due to smuggling and lack of metering that it is considering asking oil experts from the IMF or World Bank to assess how much revenue has been lost.
According to this article, the contracts for meters was never awarded by the CPA.

US sloppily managed Iraqi oil money by Irwin Arieff, Reuters, June 22, 2004
The U.S.-led civil administration in Iraq is sloppily managing billions of dollars of Iraqi oil money and moving at a glacial pace to guard against corruption, an international watchdog agency charged on Tuesday. The Coalition Provisional Authority has left a door open to smuggling by failing to award contracts for equipment to meter Iraq's oil production despite having announced the contracts had been granted, the International Advisory and Monitoring Board said.
So here it is, 15 months after the war started and Iraq's oil production has no meters. But by golly, the US is going to build a $1 billion brand spanking new embassy in Baghdad. (They're shifting the money over from water projects. So chi chi diplomatic, n'est-ce pas?

It was the oil. It is the oil. It has always been about the oil.


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