Iraq working to tap its vast oil reserves

BASRA, Iraq — On a bleak stretch of desert near the Iraq-Kuwait border — half a world away from the Gulf of Mexico and last year's blowout — BP is riding high, rapidly developing one of the world's richest oil fields.

The British energy giant plans to drill 3,000 new wells here over the next 10 years and build a town from scratch to house 4,000 employees. BP and Iraqi officials hope the Rumaila field soon will become the second most productive in the world — after Saudi Arabia's Ghawar — propelling the country into competition with Saudi Arabia and its other powerful oil-producing neighbor, Iran.

Iraq sits on the world's third largest oil reserves, after Saudi Arabia and Venezuela, with the biggest known fields lying under the windswept sands outside Basra. Despite aging pipelines, spotty electricity, chronic insecurity and a maze of inefficient bureaucracy, the oil sector is pressing an ambitious expansion plan that will determine Iraq's economic future long after the last American soldiers withdraw at the end of the year.

Earlier this month, thanks largely to the gains at Rumaila, Iraqi officials said that daily oil production had climbed to 2.7 million barrels, the highest level since the U.S.-led invasion nearly eight years ago. Though that's barely a quarter of what Saudi Arabia produces, Iraq claims that within seven years it could surpass its rival by increasing production to more than 13 million barrels a day.

That would be a colossal achievement, and few expect it to happen. But after three decades of dictatorial neglect, economic sanctions and conflict that decimated Iraq's oil sector, the increases so far are "extraordinarily encouraging," said Jim Jeffrey, the U.S. ambassador to Baghdad.

The international oil industry views Iraq as one of the last great crude jackpots. Experts think that Rumaila and the nearby West Qurna fields — where a consortium led by Texas-based Exxon Mobil is working — could reshape world markets and bring down oil prices. They also could rattle the Organization of Petroleum Exporting Countries, putting Iraq on a diplomatic collision course with fellow members of the oil cartel.

More immediately, oil could finance Iraq's postwar recovery. Crude exports account for roughly 90 percent of government revenue, more than $190 billion from 2005 to 2009, according to U.S. government figures.