Reports: Iraq lost $16 billion on oil exports due to attacks, bad equipment

Thursday, September 28th 2006, 12:11 pm

By: News On 6

WASHINGTON (AP) _ Iraq's most important moneymaker _ its oil industry _ lost $16 billion in potential foreign sales over two years to insurgent attacks, criminals and bad equipment, a secret U.S. audit says.

The Baghdad government ``must take bold action'' to protect its oil and electrical facilities, concludes an unclassified summary of the classified audit on Iraq's energy sector.

``Iraq cannot prosper without uninterrupted export of oil and the reliable delivery of electricity,'' Stuart W. Bowen, special inspector general for Iraq reconstruction, said in the summary released Thursday.

In another report, Bowen said sewage drips through the ceilings of a newly constructed building at the Baghdad Police College because of poor construction and the use of inferior plumbing materials.

Bowen released both reports as he prepared to testify Thursday before the House Government Reform Committee, which has been looking into waste and fraud in billions of dollars worth of Iraq reconstruction projects.

In addition to the estimated $16 billion loss of potential oil export revenue between January 2004 and March 2006, Bowen said Iraq also is paying billions of dollar to import refined petroleum products it needs.

The United States has invested some $320.3 million to help Iraq's security forces better protect its oil and electricity infrastructure. And it has developed an array of plans to help the three Iraq ministries that share responsibility _ Ministry of Defense, Ministry of Oil and Ministry of Electricity.

But Baghdad didn't have a permanent government in place until recently and some ministries showed ``limited initiative,'' leaving Iraq with ``much to do'' to put the U.S. plans into action, the summary said.

Bowen said that even if attacks ceased, criminal activity and aging and poorly maintained infrastructure would still hamper oil exports and electricity production.

The full energy report remains classified, as do U.S. figures on the number of attacks to the sector. Though the unclassified summary was released Thursday, the classified report was completed in July.

The Bush administration predicted three years ago that Iraq would finance its own reconstruction using oil revenues. Iraq, a founding member of the Organization of Petroleum Exporting Countries, has the world's third-highest proven reserves.

But oil production slipped after the invasion and the country has struggled to resume production to prewar levels of about 2.5 million to 3 million barrels a day. As of last May, production stood at about 1.9 million barrels a day, according to the U.S. Energy Information Administration.

It is estimated that in 2005, oil exports earned the country about $26 billion.

In the report on Baghdad's police academy, Bowen said his inspectors found ``construction deficiencies of such magnitude'' they need prompt attention.

Among problems was plumbing so bad that dirty water from sinks and toilets drained through concrete upper floors throughout the building and dripped into first-floor cadet dormitories, threatening health and possibly weakening the structure.

The Bush administration has hung U.S. withdrawal from Iraq on it's ability to train Iraqi police and soldiers to take over the country's security.

The police facility existed before but was being expanded so more cadets could be trained at one time.

The audit findings on the academy raise questions about whether the U.S. Army Corps of Engineers did a poor job monitoring the construction.

``The answer has to be yes,'' said Maj. Gen. William McCoy, the corps' chief Army engineer for Iraq reconstruction. ``We allowed the quality to be like that. I'm investigating this right now. We have been for two weeks.''

McCoy said by telephone from Baghdad that the corps recognized there were problems in May and so ended the contract for the project with Parsons Corp. The American company has had problems with others projects among some nearly $1 billion worth of work it has in Iraq.

``We had to terminate them because there was deplorable construction,'' McCoy said.

Parsons did not immediately return a phone call seeking comment.