By Ahmed Rasheed BAGHDAD, Nov 23 (Reuters) - Iraq lost $24.7 billion of potential oil revenues in the past three years because violence and political instability have damaged existing operations and blocked new projects, Iraq's oil watchdog said on Thursday. Years of United Nations sanctions, mismanagement under Saddam and now daily violence since the March 2003 U.S.-led invasion have severely degraded Iraq's oil sector and it now needs billions of dollars of capital investment. The general inspector's office of the oil ministry said in a report that the main reason for dwindling oil production and exports was the failure to complete planned construction projects to expand Iraq's output capacity. Iraq's oil reserves are the third largest in the world. Poor technical management and a failure to employ new methods of drilling and extracting oil had led to the loss of many productive wells in Iraq's Rumeila South and north oil fields, it said. "Problems in oil fields caused a rise in water levels in productive wells which led to lost production in a large number of wells in both Rumeila south and north oil fields," it said. Iraq had managed to develop only 17 oil fields out of 80, and only 1,600 of its 2,300 wells were actually productive. The watchdog blamed both U.S. and Iraqi officials, saying many U.S. pledges had not been fulfilled and criticising the Iraqi Oil Ministry for a "lack coordination and weak supervision of oil companies attached to the ministry". Sabotage attacks have made Iraq's northern export pipeline to Turkey unusable for most of the time since the invasion so Baghdad relies mostly on its main southern Basra oil terminal for exports, which an oil ministry spokesman said this week stood at around 1.7 million barrels per day (bdp). Iraq aims to double exports by 2010 and raise output to 6 million bpd from 2.3 million bpd. The report said sabotage of pipelines from the northern fields cost Iraq $8.7 billion from 2004 to mid-2006. Frequent changes in oil ministry staff and executives as a result of political reshuffles had also damaged strategic planning and development. "All indications confirm that the oil sector in Iraq can't stand up on its own without the participation of international companies to develop oil fields and increase export rates," the report said. Major international oil companies are hanging back from investment in Iraq until a long-delayed oil law to regulate the sector is formulated.
