Fears of Iraqi oil fires fuel global panic

Near the Kuwait-Iraq border - Flames lit up the night-time desert sky from the direction of Iraq's petroleum centre Basra, and American and British forces entering southern Iraq saw oil wells on fire.

United States military planners and oil importers have feared Saddam Hussein would order troops to sabotage their country's precious patrimony - 112 billion barrels of oil in the world's second-largest proven crude reserves.

Retreating Iraqi troops burned Kuwait's oil fields during the 1991 Gulf War. Worries mounted in recent weeks that Iraqis have rigged their oil wells with explosives in hopes of slowing a US-led attack and making the country's oil wealth worthless for any new government.

US Defence Secretary Donald Rumsfeld could not confirm any sabotage seen on Thursday, saying three or four oil wells may have been set afire. It was not immediately clear how the fires started.

Still, oil markets reacted in a buying frenzy, afraid these sightings might presage the wholesale destruction of Iraq's oil industry.

In London, May contracts of North Sea Brent crude surged as high as $27,50 before closing lower at $25,50 on expectations that an imminent US-led ground assault would bring a quick end to the war.

April contracts of US light, sweet crude peaked at $30,60 in New York before dropping to $28,80 by late afternoon, down $1,08 from Wednesday's close. US futures reached a post-Gulf War high of $39,99 on February 27.

The Pentagon - which confirmed Wednesday that Iraq has booby-trapped oil wells so one person could blow them up - insists it will try to secure oil fields quickly to prevent Saddam's forces from damaging the nation's 1,685 wells.

But the damage may have begun.

In Kuwait, about 13km south of the Iraqi border, fires could be seen flickering on the horizon. Reporters with US Marines crossing into Iraq from Kuwait saw burning oil wells that sent up a black cloud under a nearly full moon.

A battalion commander with a US Marine unit in northern Kuwait told The Associated Press that "three oil wells have been torched."

The Arab satellite television channel Al-Arabiya reported that fires erupted in Iraq's valuable Rumeila South field 81km west of Basra and just north of the Kuwaiti border. Rumeila South is one of Iraq's largest fields, with more than five billion barrels in reserves. It lies near a similar-sized field called Rumeila North.

Mussab Al-Dujayli, the head of crude sales at Iraq's state oil monopoly, said he could not comment on the reported fires. "I hope you understand my position," he said by phone from his home in Baghdad.

The Organisation of Petroleum Exporting Countries sought to calm markets, announcing its members have pledged to maximise output to compensate for any disruption in crude supplies from Iraq. Iraqi crude exports, totalling two million barrels a day, are expected to cease as the war intensifies.

A loss of oil from Iraq could squeeze supplies for importing countries, including the United States, which depends on Iraq for two percent of all the crude it consumes. A scorched-earth demolition of wells and other oil facilities could also deny the US and British governments an asset they hope will help pay for postwar reconstruction of Iraq.

Al-Dujayli confirmed that Iraq has stopped exporting oil from its Persian Gulf port of Mina al-Bakr, the destination for much of the oil produced near Basra.

Leo Drollas of the Centre for Global Energy Studies in London said he wouldn't be surprised if Saddam had issued general orders for sabotage to begin.

"But it wouldn't be everyone who executed the commands," he said. "It depends on which army units are there and how much they're looking over their shoulders."

With tensions rising over the past several months, Saddam has had plenty of time to organise such destruction. He also has the experience.

In 1991, Iraqi troops needed just a few days and some plastic explosives to destroy more than 700 well heads and turn Kuwait's occupied oil fields into a desert inferno. The result was geysers of burning crude and lasting environmental damage. Teams of firefighters worked from April until November to put out the fires.

It took Kuwait more than two years and US$50-billion to restore its oil output to prewar levels.

Sabotage in Iraq could be much costlier, largely because its fields and pipelines are badly run down after a dozen years of UN economic sanctions. Its fields are also much farther from the sea than those in Kuwait, meaning a ready source of firefighting water might not be so easily available. - Sapa-AP

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