Estimating the Costs of Iraq’s Reconstruction

Now that the war is over, what will it cost to rebuild the war-torn nation? Analysts have differing estimates for the cost. While the United Nations Development Program estimates the cost at $30 billion over the next three years, others have estimated cost at over $100 billion (1).

The reality is that final reconstruction costs will depend on the amount of destruction that the Iraqi regime incurs. Of course, that variable is currently unknown, which makes it difficult for both development agencies and engineering and construction firms to accurately estimate the costs of reconstruction. In fact, an anonymous executive from an engineering and construction firm recently commented on the U.S. Agency for International Development’s (USAID) procurement process. “The whole procurement process made us nervous. In some cases, USAID couldn’t answer basic questions (2).” Simply put, the uncertainty surrounding the effects of war makes it difficult to estimate the costs of reconstruction.

However, estimators with companies who have been invited to bid on the emergency projects by USAID can look to the past to learn about the future. While it has limited utility, the situation in war ravaged Kuwait in 1991 lends itself to comparison.

At the end of the 1991 Gulf War, retreating forces of the Saddam Hussein regime blew up an estimated 732 oil wells in Kuwait. The effects of the oil fires were predicted to be devastating. Many believed it would take up to five years to suppress the fires and restore the production of hydrocarbons (3). In fact, some high-profile scientists worried that the black soot caused by the fires would reach the stratosphere and stay aloft long enough to circle the earth and trigger a mini-nuclear winter (4). Of course, had this actually happened, it would have raised actual costs of reconstruction well above even the highest cost estimates of the time.

Fortunately, one factor effectively negated this scenario: the content of the burning oil was relatively high in sulfur. The presence of sulfate in the smoke plumes increased the likelihood that the pollutants would be naturally precipitated from the atmosphere. This is exactly what happened to the plumes of sooty, pitch black smoke that were created by the inefficient burning of Kuwaiti oil. Lawrence Radke, a scientist at the National Center for Atmospheric Research, recently commented on the effects of the Kuwait oil fires and was quoted in The Wall Street Journal. “They’d show a black plume in a corner of the Gulf, shaped like an exclamation point, but it would disappear by the time it got to the Indian Ocean,” said Radke. “Because of the sulfur, even these huge fires (produced) aerosols that could be removed by atmospheric processes: 10 days and it (was) over (4).” Apparently, Mother Nature helped the world prevent a climatic catastrophe in 1991.

So did Bechtel Corporation, which was awarded a large contract by the Kuwait Oil Company. Both parties knew that if they could extinguish the fires quickly, then they could help minimize the fires’ impact on the environment. Bechtel, now an SCRC member company, arrived in Kuwait in March of 1991. The company mobilized an international workforce and coordinated a massive effort to put out the wellhead fires, to stop the gushing flow of oil, and to help resurrect the Kuwait oil fields. The first project involved extinguishing more than 650 wellhead fires and capping 750 damaged or burning oil wells (3). Surprising many analysts, the project took only nine months to complete. In fact, the ceremony in which the emir of Kuwait extinguished the final oil well fire occurred on Nov. 6, 1991 (4).

A subsequent Bechtel project involved rehabilitating the oil fields’ oil gathering and processing capabilities. During this project, more than 2,000 kilometers of pipe were laid. Workers reconstructed storage tanks, administration buildings, warehouses, tank farms and 22 gathering centers. An entire telecommunications system, consisting of 6,500 telephones and portable radios, was installed to support the operation, which required an international force of 16,000 workers and 6,000 pieces of construction equipment. By December of 1991, the Kuwait Oil Company was producing 400,000 barrels of oil per day. Just one year later, its oil production was restored to the prewar production capacity of 2.1 million barrels per day (3).

References:

(1) Fogarty, T. (3/28/03). Companies bid on rebuilding Iraq. USA Today.

(2) Rubin, D. et al. (March, 2003). War fuels burst of contracting. Engineering News-Record.

(3) Kuwait Reconstruction. Bechtel.com.

(4) Begley, S. (3/21/03). Burning oil wells may be less damaging than first thought. The Wall Street Journal.