Following surge gasoline imports into the south in the wake of civil unrest there mid-August - sparked in part by fuel and power shortages - supplies of gasoline on a national basis have improved remarkably. In fact, gasoline supplies may have exceeded demand over the past fortnight with reasonable volumes being placed in reserve or buffer stocks. This, if maintained, and if greater equity is achieved in distribution, will greatly reduce the aggravating effect of panic buying and hoarding.

Despite greater trucked imports of LPG into the south, also in response to the Basra situation, total supplies nationally remain well short of demand. UNJLC estimated that supply is less than two thirds of presumed national requirements of 4200 tonnes per day but with very uneven distribution and probably substantial distribution and filling losses because of the parlous state of LPG bottles nationwide. The situation has improved marginally in the south with 80 tonnes trucked in each day from Kuwait on a regular basis. However, greater quantities averaging perhaps in excess of 1000 tonnes per day should be available from barged imports offloading at the Khor Zubayr LPG export facility before the end of the month.

More seriously for LPG, the restart of the Southern Gas Plant - which, optimistically, was expected to provide up to 1200 tonnes of product per day - appears impossible until at least October. A September start-up may have been feasible had stable national grid power been available to various elements of the upstream system required to feed the plant. This now looks most unlikely. Start-up is now dependent on the commissioning of adequate independent power at these sites. The LPG crisis will therefore continue, albeit at an increasingly lower level of intensity in the south.

On a more positive note, refinery production of light liquid fuels continues to grow. Problems in one refinery are generally offset by improvements in others with Basra refinery resuming a more important role after a very difficult period. The trend is generally upwards. UNJLC estimates that Iraq's three major refineries are producing at least 30 million litres of gasoline, diesel and kerosene daily, against estimated national requirements of between 37 and 42 million litres. We are, however, most concerned that locally-produced supplies will be seriously affected when Baiji refinery - the country's largest - starts to go into much-needed maintenance in early November.

Kerosene production probably now exceeds current demand. The excess, as expected, appears to be going into winter stockpiling at various depots around the country. It is, however, far from certain whether there is sufficient time remaining, with expected production levels, to establish an adequate stockpile before winter sets in. Diesel production may now meet at least two-thirds of demand but the requirement to produce diesel - a vital fuel not only for transport but also for power generation, water and sanitation plants and agriculture - has reduced the refineries' ability to provide kerosene winter requirements. However, diesel imports are expected to start before the end of the month. If volumes are sufficient, this may both alleviate the diesel situation and allow the refineries to devote more of their capacity to kerosene.

Although overall supplies do seem to have improved, equitable and effective distribution of all types of fuels remains a major challenge. This has been addressed belatedly by the Coalition but now has the attention at the most senior levels, both civil and military. Capacity-building (including communication, computers, and better management systems) within the Ministry of Oil companies responsible for distribution and much closer co-operation and co-ordination with the Coalition at the operational level seems to be evolving. Smuggling and security is also being addressed ever more actively. It is now clear that the Coalition has deferred plans to transfer responsibility for all fuel imports to the Ministry of Oil for at least two months, although the Ministry will continue to manage some imports. This commitment to security of supply will increase overall (and presently precarious) stability of the fuels equilibrium.

From August 25- - 27, the UNJLC will be represented at the Iraqi energy Production and distribution Conference hosted by the Coalition's Central Command in Tampa, Florida. This conference will consider strategies for oil infrastructure and production; fuel distribution; power infrastructure and production; and security and counter-smuggling.

It is clear that a fuel supply and distribution crisis will continue into 2004 (with imports for LPG and perhaps gasoline required well into next year) but the focus will most likely shift from ensuring adequacy of supply to equity of distribution of those supplies.