Uloum, also announced plans to construct a new $1 billion refinery south of Baghdad with an expected refining capacity of 140,000 barrels of oil per day. He announced plans to more than double oil production to 3.5 million barrels per day over the next two years. With global oil prices now hovering around $60 a barrel that would give an enormous boost to Iraq's still basket-case economy.

The State Department's Iraqi Weekly Status Report indicated crude output for the week of July 11 to average at 2.21 million barrels per day, up from 2.11 million barrels per day the previous week but still lower than prewar levels of 2.5 million barrels per day. The data also pointed to exports for July coming in at 1.693 million barrels per day, up from an average 1.44 million barrels per day in June.

Iraqi officials hope to boost production to 2.5 million barrels per day by the end of 2005 in an effort to increase revenue. State Department data indicate that July exports could earn Iraq some $2.85 billion, up from $2.03 billion for June.

So far, so good. And the achievement is an especially impressive one as it has been carried out in the face of the insurgency that continues to rise in intensity, with 22 car bombs in Baghdad alone in the last week of July.

However, compared with even the crippled levels of Iraqi oil production before the U.S.-led military invasion to topple Saddam Hussein in March 2003, Iraq's energy sector, especially its crucial oil and electricity systems, has still not recovered even to those levels. Before the U.S.-led invasion, Iraq's daily oil production was 2.6 million barrels per day, or half a million barrels per day higher than the average daily production from December through May.

U.S. military analysts note that the impact of the insurgency was central to the long-stalled recovery. From December 2004 through May this year, Iraqi oil production per month remained stagnant averaging 2.1 million per barrels per day. This was in striking contrast to the much more impressive progress in reconstructing the oil sector there in the first year after Saddam was toppled, and before the insurgency had escalated to its current scale.

Although there have been many recorded attacks on "soft" oil industry targets like pipelines, insurgents attacks continues to be primarily directed against the newly organizing Iraqi security forces.

Nevertheless, as recently as last week, insurgents attacked a seven-tank oil train with a bomb setting off a huge explosion as it passed through the Doura neighborhood of southern Baghdad.

A U.S. Government Accountability Office report issued last week noted that large sums of money earmarked by Congress for reconstruction in Iraq's energy sector had either been diverted for other more immediate needs or it simply had not yet come through the fiscal pipeline.

The GAO report acknowledged that the plan to even get Iraq back to its pre-March 2003 oil production levels "has been slower than originally planned." And the report confirmed repeated insurgent attacks on Iraqi oil pipelines and other attacks and distractions since December has kept production way below even that modest 2.6 million barrels per day level.

Nevertheless, this dark picture brightened somewhat in July. During that month, more than 30 vessels carrying Iraqi oil exports are believed to have sailed from Iraqi or neighboring ports, including five northern shipments from the Turkish port of Ceyhan, the gateway for Kirkuk crude exports to Europe.

Export numbers were at their highest despite the continued high rate of bomb attacks in Iraq, though there have been fewer directed at oil facilities than in previous months. Other factors for rebounding exports were good weather and fewer breakdowns of oil facilities, shipping sources told UPI.

Poor weather conditions, power outages, equipment breakdowns and security problems influenced dropping exports during the first half of the year with exports averaging at 1.39 million barrels per day, down from the 1.55 million barrels per day average for 2004. The Kirkuk pipeline was closed for six months due to constant bomb attacks.

Iraq is also succeeding in lining up more foreign customers for its excellent quality crude. In June, its State Oil Marketing Organization signed term deals with foreign customers for the supply of nearly 1.5 million bpd of southern Basra light oil for the second half of 2005.

But even if the insurgency can be contained or significantly rolled back in the coming months, and Iraq's relatively modest oil production goals are reached over the next two years, oil industry analysts do not expect the country to rapidly become a major player in the global market soon, or for its production to have any appreciable effect on global oil prices.

Even where analysts expect these to significantly drop in the coming years it is because of the anticipated greatly increased volume of production and exports that are projected to come from such sources as Canada, Kazakhstan, Nigeria, Russia and Brazil, rather than Iraq.

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