Oil Report

Iraq port buckles under demand of arriving oil majors

* Umm Qasr port ill-equipped to handle oil equipment

* Firms complain over capacity, corruption, service

* Iraq trying to claim place among oil elite

UMM QASR, Iraq, June 28 (Reuters) - Iraq’s hopes of building economic prosperity on the back of multibillion-dollar deals to develop its vast oil reserves have met a major hurdle in a lack of dock space and an impenetrable bureaucracy at its top port.

Neglect, under-investment, combined with red tape, corruption and bureaucracy have left Umm Qasr port, near the oil hub of Basra, ill-equipped to deal with the demands of oil majors trying to pour tonnes of equipment into Iraq.

“This port is the worst in the Middle East,” said an agent working for a foreign company at Umm Qasr as ships queued in the Gulf and trucks waited in long lines to collect their cargo.

“No machinery, no services, no system,” the agent said, barely able to disguise his frustration.

Emerging from decades of war, sanctions, and economic decline, Iraq is banking on a quadrupling of oil output capacity to claw its way out of the chaos unleashed after the 2003 U.S.-led invasion.

But the firms like BP BP.L, Royal Dutch Shell RDSa.L and China's CNPC which are vying to make it happen are struggling just to get the equipment they need off the boats and through the port to some of the largest oilfield projects on the planet.

Iraq sits on the world’s third-largest oil reserves and has signed deals to boost its output capacity to 12 million barrels per day in seven years, a massive boon for a country struggling to provide the most basic services to its 30 million people.

“We import lots of goods because we can’t find all these materials in Iraq but there are problems with customs and tariffs. For me it’s a nightmare,” said an executive from one of the major foreign oil firms that won a contract in Iraq.

The complaints from foreign oil executives about port capacity, crumbling roads and creaking infrastructure have prompted Iraqi oil officials to try to get an agreement from Kuwait to open a special border crossing for oil companies.

“The human and technical capacities of the Iraqi ports company are insufficient to handle all the work,” Dhiya Jaafar, director general of Iraq’s state-owned South Oil Co. (SOC), told Reuters last Friday.


Iraq has only a sliver of shoreline, squeezed in between Iran and Kuwait, and Umm Qasr is handling 80 percent of Iraq’s imports. Grain imports for Iraq’s huge public food ration programme are a major part of its business.

Firms importing wheat, sugar and rice complain of heavy bribes, poor service and high handling costs that make Umm Qasr one of the most expensive ports in the world for shippers.

At Rumaila, Iraq’s largest producing oilfield, executives, engineers and drillers are beginning a large overhaul to nearly triple its 1 million-barrel per day output.

The project was the first Baghdad signed, with BP and CNPC taking it on. Oil service company Weatherford International WFT.N is already on the ground with 300 staff as one of the firms that won part of a $500 million deal to drill new wells.

Ten other oilfield development deals are also coming online.

The Iraqi authorities are pursuing a number of schemes to improve the country’s port facilities, including modernising the docks at Umm Qasr and planning a major new $6 billion port at Fao, at the southernmost tip of the country.

In the meantime, the state ports authority says it can really only cope with the grains imports.

“At the present time, the port can handle the commercial trade, but for the needs of the oil companies we will need more dock space,” said Captain Fadhil Abd Ali, assistant director general of Iraq’s state ports operator.

It can take four days to unload a boat carrying 5,000 tonnes of cargo at Umm Qasr. And prices are high.

“The (docking) fees in any world port don’t exceed $1,000, but in Iraq we have to pay $8,000 to the naval agent,” Emirati shipper Muhammad al-Suwaidi told Reuters.

Then come the kickbacks.

“Anyone who says he doesn’t take bribes is a liar,” said a port worker, who declined to be named. (Additional reporting by Khalid al-Ansary, Ahmed Rasheed and Rania El Gamal in Baghdad; Editing by Matt Robinson)