The Iran-Iraq War:
An Intelligence Assessment
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The Iran-Iraq War: Some Oil Vulnerability
The Iran-Iraq Wan Some Oil Vulnerability Issues
Keythe first two weeks of intensified hostilities there was no serious
damage to oil facilities in the belligerent countries. Both sides have targeted facilities, however, and we expect these attempts to continue. Beyond this we are concerned about the risks of damage to the petroleum systems of Kuwait. Saudi Arabia, and possibly Abu Dhabi, all of which are highly vulnerable to Iranian attad
Information available as of2 has been used In ihe preparation of this report.
The Iran-Iraq Wan SomeIssues!
The latest round of Inn-Iraq fighting once again jeopardizes major petroleum facilities in ihc Persian Gulf region. The invasion places Iranian ground forces close to Iraq's southern oilfields, and the Iranian Air Force remains within easy sinkingof the Northern petroleum system, whichaccounts for all Iraqi oilb/d. Iraq, for iti part, is attempting to interdict Iranian oil sales by bombing Kharg Island, the terminal handling most of Iran's crude exports. Beyond this, thereubstantial risk that the war will spread into Kuwait and Saudi Arabia.]
From an oil market viewpoint, the oil system in southern Iraq is of little concern. No oil has been exported from the Persian Gulf since Ihe beginning of the svar. Moreover, the most importantIraq's two sea island export terminals in the Persianalready been rendered inoperable. Da-mascus's closure in2 of Ibe Iraq-Syria pipeline to the Mediterranean effectively shut down all remaining export outlets for southern Iraqi crude. The major petroleum facilities in (his area might still constitute lucrative targets for Iran. While damage in these areas would not impair current Iraqi export capability, it would complicate postwar
The petroleum production and export systems in both countries are vulnerableumber of choke points. Many of these choketerminals,facilities, pump stations, and crude processingbeen subject to sporadic attacks since the war began in lateraq has suffered extensive damage, particularly to its Persian Gulf offshore export terminals. In contrast, damage to key choke points io Iran's petroleum system before the current offensive has been minimal |
heat Fmclllilei. The continued flow of Iraqi oil exports is entirely dependent on oil production from Iraq's northern oilfields. The only outlet for this crude is ibe pipeline through Turkey io Yumurtalik on the Mediterranean. Both the pipeline and production system are highly vulnerable to disruption. Iran, for example, could interdict this pipeline throughin either Iraq or Turkey or by air attacks against the pump stutions along the line. Sporadic sabotage has taken place during the war, but the flow through the Turkish pipeline has only been interrupted for short periods. Another key facility is the large crude processing complex at Kirkuk. Iran already has knocked out three of tbelants ai this facility, which has caused the lossn desorbmg capacityl
Iranian facilities Iran's most vulnerable choke point is the Kharg Island oil export terminal The terminal, designed to export more. consists of an oil-loading jetty on one side of theea island off the other side,onventional buoy-mooring system. Approximatelyillion barrels of storage capacity are also located on the island. Iraq has conducted sporadic airstnkes against Khargduring the pastonths, but damage never posed much morehort-term inconvenience to Iranian petroleum operations. Other importantfacilities in Iran include three mainland booster stations that pump crude from the oilfields to Kharg Island Iraq attacked tbe Gurrch booster complex last September, but damage was not serious Iran has more than sufficient capacity to enable it to bypass damage to Gurrch and still maintain export levels.
Recent Military Aetiiity
According to our information, the current fighting has not significantly damaged petroleum facilities inbelligerent country. This could change, given the nature of the fighting and the proximity to highly exposed facilities. Shortly after Iran launched its
Irau chimed to have bombed Khan: Island.
I Two tank-
era reportedly were strafed, but not seriously damaied. This pattern is similar to most previous Iraqi airstrikes againit Kharg Island. There it only one previous incidentanker, of Turkish registry, was damaged at Kbarg Island. No other significanteported at other oil facilities in either country,
We are most concerned about tbc damage that could be inflicted on oil facilities in Kuwait und Saudi Arabia. Their oil production and export systems are
highly concentrated and extremely vulnerable toor direct military action. Iran already hasits capability to inflict damage to theIn earlyighters attacked Kuwait's largest gas-oil separation plant (Umm al'Aysh) at the Raudhatain Oilfield. Within a
biiity, and have taken countermeasurcs during the past year to provide early warning and to make il more difficult for Iranian commandos to reach their coastal petroleum facilities. These include an increase in air and naval patrols around potential target areas, the positioning of guards at some offshore oiland tighter controls on access to installations. Both countries also arc reviewing engineeringthat would reduce the vulnerability to disruption. Despite these measures, Tehran could still seriously damage petroleum installations in various Persian Gulf countries.!
Oil Facility Restoration
If key facilities arc damaged, major workbe needed for restoration and repair. Tothis issue we have analyzed the lead timerestore major petroleum facilities in tbeA key problem is that many criticalof these oilexample, highseparation valves, storage units, loadingcrude stabilizationand not generally stocked.and installation could require several
The following examples illustrate leadtimo needed to repair facilities or choke points:
Iraq's damaged sea island terminals would require as long as two years to be restored. To shorten the time needed to resume Persian Gulf exports,has accepted the planS petroleum facilities construction firm to build makeshiftand resume partial loadings from single-point mooring buoys. The equipment has already been procured over several months and is being stored in Bahrain until the war is over. Even with this planning completed. Iraq must still wait four months for on-site fabrication and installationtbe first crude could be exported.
Saudi Arabia suffered two industrial accidentsthe past four years, seriously damaging most essential equipment at two gas-oil separation plants. In each case.oonths were needed to bring these facilities hack in operation. Similarly. Kuwait faces atne-year restoration effort at its gas-oil separation plant bomb damaged by Iran last
Selected Indicators of Oil Market Conditions
i toon. andcautaaptoMnced iaraa-
ibctciu4 ri[*ffiiin Ifiiuan and Iraqi cxpom
Continued houihtuB between Current hotiililiciut mo father ah- ul additionallIraqi oil production at cspon
txomoax rasa-try a
wm amotion ofconsumptionc-paliM flowie rV
Continued voluntary inventory War wcaUles intorsmaaini escort and
pntdacutw faaliuc* and disrupt-Price compel ition among. OPEC lhi oil flow, lasi
ads won and demand (er OPEC oil rebounds sharply.
OPEC oouniriet maintain ntoduc-uoa ODtlmp lor several more
of critical equipment- Despite these efforts, we do not believe the Saudis or Kuwaitis can rebuild rapidly any key facility that has sustained mayor damage. Seeor more detail on the issue of replacement equipment availability.
Basedariety of information.
il appears that Persian Uutt nines nave initialed planning to reduce thesnapback time in an emergency. Among the measures under consideration are the construction of bypasses around critical choke points, contingency plans to cannibalize equipment from less essential facilities, and the developmenttrategic inventory
Oil Market Risks
The oil market has reacted relatively calmly to the Iranian invasion because fighting has inflicted no major new damage to oil facilities or seriously threat, ened supply routes. The risk to the market is thai the oinflict will escalate to neighboring regions andthe How of oil. Surplus capacity, including inventories outside the Gulf, is insufficient to handle
Ihe potential loss of supplies if the conflict spreads. Excess oil production capacity outside tbe Gulf now amounts to. According tosources, inventories in mayor consuming countries have been pared toillion barrels above normal levebj
Developments on tbe Iran-Iraq front could affect the oil market in widely different ways:
The combat could drag on for many months, with enough military action to halt all exports from Iraq and all or most ofhat Iran has been exporting in recent months. The oil market would tighten quickly and the risks of spillover to Kuwait and perhaps Saudi Arabia may be greatest.
The conflict could end quickly. If oil production in Iraq is restored quickly while demand for oilweak, Saudi Arabia would have to absorb unprecedented production cuts toollapse in oil prices)
Pclroleum facility reconstruction following serious damage could lake many months. The specific time needed to repair critical choke points and restore them to operation will depend on the availability of major components, materials, support equipment, and labor. Perhaps most essential is the accessibility of major components (hat arc special-order or custom-designed ^capital items not normally stockpiled in the industry.
Before manufacturing orders are placed, prospects for obtaining items cither through cannibalization or by purchase from existing inventories normally will be explored. For example, two of the single-pointbuoys procured by Iraq for its Persian Gulf restoration effort had been already manufactured and were sitting in ports awaiting shipment to other customers. In many cases, however, these options are not open and it will be necessary to pursue the manufacturing route. The time required toequipment is contingent on the number oforders. This situation is now somewhat relaxed since many petroleum projects have been deferred because of current market conditions. Customers can, on some occasions, buy their way to the head of the queue by agreeing lo pay premium prices!
tbe notice to proceed is given, the customer will be placed in the queue. During this time, it will be necessary to come up with detailed designand other necessary material for the vendor.
time will be determined by the number of items being ordered. It is unlikely that large numbers of capital equipment can be manufactured simultaneously.
Once fabrication is complete, delivery and installation will in most cases take several more months!-
The accompanying table indicates the limemanufacture major petroleum equipment fromnotice to proceed is given to the completionThis information is basedurveyequipment suppliers taken on
allowing for the current recession in equipment orders, leadtimes to delivery arc long:
It would be necessary to draw up detailed design specifications, unless off-the-shelf designs arcIn many cases, the competitive bid process might be sought. Weeks might be requiredanufacturer isotice to proceed.Original document.