Iraq Oil Pipeline two years Behind

Washington Post, August 3 – A project to build a critical oil pipeline in northern Iraq has fallen more than two years behind schedule, costing the Iraqi government $14.8 billion in revenue and jeopardizing the safety of local water supplies, according to a report by U.S. government auditors released yesterday.

The 31-mile pipeline, designed to connect Iraq’s northern oil fields with a major refinery, is intended to replace an old, decrepit line that has been leaking oil for years. But because contractors were unable to finish construction of the new pipeline by March 2004 as scheduled, oil is pooling in the open air rather than being sped to market, auditors with the Special Inspector General for Iraq Reconstruction say.

Even when the project is complete, the auditors conclude, there is no way of knowing whether it will actually be an improvement because reconstruction officials have not been monitoring its progress.

"There is no reasonable assurance that project construction will meet the standards of the design because the U.S. government’s processes to independently verify project completeness and quality were ineffective," the report’s authors wrote.

The project, managed by the Army Corps of Engineers, is just the latest in a series of projects that have gone awry. The U.S.-funded reconstruction program in Iraq has been plagued by cost overruns and schedule setbacks, in large part because of security concerns, but also because of flawed management and poor planning. Projects to build medical centers, prisons and power stations have all fallen short of projections. Now, the U.S.-directed portion of the reconstruction is wrapping up, and control is being transferred to the Iraqis.

But as that happens, Iraq will need oil revenue to fund the work. The new pipeline — intended to stretch from Kirkuk to Baiji — was supposed to increase the flow of oil from 500,000 barrels a day to 800,000. An Iraqi firm was contracted to do the bulk of the work.

Reconstruction officials initially hired the Halliburton Co., a subsidiary Kellogg Brown and Root, to monitor the project. But auditors found that KBR did not perform daily reviews of the project’s progress; instead company officials saw their role as advisers to the Iraqi firm doing the work. In June 2004, U.S. reconstruction officials cancelled the limited oversight KBR was doing in order to save money, even though KBR had found problems with the Iraqi contractor’s performance.

A KBR spokeswoman released a statement defending the firm’s work and saying KBR is "proud of the difficult and dangerous work performed by its employees and subcontractors."

Since KBR was removed, the report says, the government has had little insight into whether the work was actually being done. Auditors from the inspector general’s office were not permitted to inspect one work site because a subcontractor on the project "would only agree to perform the work on the agreement that no American presence ever visit."

Based on a flyover of that site, auditors saw "little evidence of progress." Auditors did see extensive oil spills, and reported that "oil fumes in the spill areas were significant and easily detected from the helicopter."

No one knows when the project will be completed. A recent assessment by the Pentagon-led Project and Contracting Office, which oversees reconstruction, said one segment of the project was 80 percent complete. The Army Corps of Engineers said the same segment was only 10 percent finished.

According to the report, reconstruction officials say they hope to have the project completed by September, but that intimidation of pipeline workers and sabotage remain a challenge.

Maj. Gen. William H. McCoy, a corps official, said in a written response to the inspector general’s report that it "did not fully take into account the effect security and insurgent activity had on the success of this project."