Work set on long-delayed Iraq oil metering system

UNITED NATIONS, Mar 25 (Reuters) Iraq, under international pressure to crack down on oil smuggling, is finally starting work on a long-delayed system to meter its oil production, an Iraqi diplomat said.

The Iraqi Oil Ministry has reached a preliminary agreement with the Royal Dutch Shell group to consult with it on creation of a system measuring the flow of oil, gas and related products, whether inside Iraq or for export to foreign markets, said Deputy UN Ambassador Feisal Amin al-Istrabadi.

The ministry also has concluded an agreement to rebuild a metering system in its southern oil port of Basra, where oil is loaded onto tankers for export, the UN envoy said in a March 22 letter circulated at the United Nations yesteday.

''This long-term development project will be implemented in stages that may be fulfilled in one or two years,'' he said.

The letter was addressed to the International Advisory and Monitoring Board, created by the UN Security Council in 2003 to watch over the stewardship of Iraq's natural resources.

The board had no immediate comment on the Iraqi letter. One member called the letter a step forward but said it was now up to Iraq to fulfill its promise.

''It's progress. We're looking forward to the results,'' said the board member, speaking on condition of anonymity because he was not authorized to speak on the board's behalf.

The international watchdog, beginning in March 2004, has regularly called on Iraq to meter its oil production, in line with standard industry practice.

The project has been repeatedly delayed amid reports of extensive smuggling, including allegations that Iraqi oil is being diverted from the marketplace to fuel the insurgency crippling the country's reconstruction.

The board's plea for oil metering was initially addressed to the US-led Coalition Provisional Authority, which governed Iraq after the March 2003 invasion, and later to the Iraqi authorities who took back power in June 2004.

Al-Istrabadi said the metering system in Basra would be rebuilt with US funding. His letter did not say how the contract with Shell or construction of the measuring system would be financed, and his office said he was away yesterday and not immediately available for comment.

Reuters DH VP0443