Sunday, May 25, 2008

(Adds more South Oil dismissals.)

By Hassan Hafidh

Of DOW JONES NEWSWIRES

AMMAN (Dow Jones)--Jabbar Al Leaby, the veteran chief of Iraq's largest state-run oil company, has been replaced, raising concerns over the stewardship of 1.9 million barrels a day of crude oil pumped from the south, an official said.

Kifah Nauman, Al Leaby's former deputy, has taken over at Iraq's South Oil Company, Hasan Jumaa, head of the Federation of Oil Trade Unions in Basra, told Dow Jones Sunday. Calls to Al Leaby's mobile phone were unanswered.

"He was removed from his post and he was appointed an adviser to the oil ministry," Jumaa said in a phone interview from Basra, the provincial capital of southern Iraq.

The removal of Al Leaby comes at a nervous time for oil markets as crude traded in New York closed above $132 a barrel on Friday amid continued geopolitical concerns amongst producing nations in the Middle East and uncertainty over supply.

Leaby has overseen operations at South Oil since the ousting of Saddam Hussein's regime five years ago. The company, headquartered in Basra, is the largest oil producer in Iraq, accounting for around 1.6 million barrels a day of exports.

At the same time, two other directors from state-controlled oil entities in Basra were replaced by the government in Baghdad.

Ali Hussein Khudier replaced Abdul Kareem Jasem at South Gas Co. and Amer Abdul Jabbar has taken over from Kareem Jabor al-Saaedy at Iraqi Oil Tankers Co., both units of South Oil.

Both officials were unreachable by phone on Sunday as were officials at Iraq's Oil Ministry in Baghdad.

Iraq has steadily increased its output to about 2.5 million barrels a day of crude since the beginning of the year making it a more influential producer in the 13-member Organization of Petroleum Exporting Countries.

A popular tribal figure in Basra, Al Leaby was one of the main figures behind maintaining South Oil's output during the worst phases of looting following the U.S. invasion and the immediate breakdown of law and order in the country.

His departure from South Oil may indicate a worsening struggle between political factions in Basra province and growing unease amongst Iraq's most experienced technocrats over plans by lawmakers to decentralize the oil industry and introduce new oil legislation.

"The reason behind his replacement is purely political,"

Mustafa Al Ani, a senior analyst at the Dubai-based think-tank, Gulf Research Center, told Dow Jones. "He was a vocal opponent of the proposed new oil law, which is based on decentralization and division of the oil sector in Iraq."

Iraq's proposed oil law could allow for the break up of the country's existing state-controlled oil companies and the introduction of international oil majors like Exxon Mobil Corp. and Royal Dutch Shell Plc.

-By Hassan Hafidh; Dow Jones Newswires; + 962 799 831831; hassan.hafidh@dowjones.com (Majdoline Hatoum in Dubai contributed to this article.)

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(END) Dow Jones Newswires

25-05-08 1423GMT