by CKR
The LA Times today has a long story on what’s happening (and not happening) in the Iraqi oil fields. It appears that KBR, a subsidiary of Halliburton, isn’t doing a very good job with its sole source contracts.
The article contains a certain amount of finger-pointing between KBR and US and Iraqi officials.
1. Injection water treatment plant at Qarmat Ali. The LAT alleges that the contract with KBR covered refurbishing the plant while ignoring an equally decrepit pipeline system. KBR says that they “can't emphasize enough that it performs all work at the direction of the U.S. government. We only do what we are tasked to do."
This is true, in a strict sense. But any reasonable contract officer would discuss the contract first with the potential vendor(s). Not to mention that it’s not unknown for the vendor to write the statement of work. Although maybe the contract officer was the guy who “jokingly described his knowledge level as ‘Oil for Dummies.’”
On a recent tour of the plant,
Only two of the five pumps that KBR fixed were operating. An Iraqi engineer said a machine to add cleaning chemicals to the water was unusable. Another system to protect the interior of the pipelines from rust was not being used for fear that the anti-corrosion additive would damage the oil fields.
Here’s what the Army Corps of Engineers said when the plant was turned over to the Iraqis in November 2004.
2. Pipelines at Al Fathah bridge.
The Army Corps of Engineers decided it would be quicker to run the pipelines under the riverbed instead of repairing the bridge. The agency ordered KBR to drill under the river despite warnings against such a route, said a Corps contracting official involved in the project. The official asked to remain anonymous, fearing retaliation from commanders.Trouble began soon after the project started in January 2004. The soil was unstable, and a borehole drilled to hold the pipes collapsed.
The Corps does many different kinds of work that requires soil testing. It’s surprising to hear that they didn't recognize its necessity for constructing a pipeline. In this case, it appears that KBR did express some technical opinions. But on the other hand,
KBR defended the project, saying that "unforeseen" subsurface conditions had resulted in "technical challenges." They also noted that the horizontal drilling needed to install the pipelines below the riverbed had never been done in Iraq, requiring the importation of new equipment.
It should have been obvious ahead of time that horizontal drilling equipment would be needed. This should have been written into the contract. Some of that equipment also has the capability to stabilize the hole. I’m wondering why that wasn’t used.
It seems as if, in both of these projects, there was little technical expertise either on the part of the contracting officer or on the part of those paid to do the work. It also appears that communication between the contracting officer and KBR was poor.
There’s really not enough in the LAT article to draw many conclusions beyond that messed-up contracting is slowing down recovery in the Iraqi oil industry and may well be damaging some of the oilfields, so that their oil may never be fully recovered. Oil wells need to be produced in a relatively continuous way. Irregular production may have begun under Saddam Hussein and continued through the decade of sanctions.
United Nations oil experts have told the U.S. government that some oil reservoirs in southern Iraq have been so badly managed that the Iraqis will be able to recover only between 15% to 25% of the oil, well below the industry standard of 35% to 60%, a recent Department of Energy report states.