The End of the World.. as we know it, page 2

This just in.. concerning Halliburton..

High Payments to Halliburton for Fuel in Iraq
By DON VAN NATTA Jr.

Published: December 10, 2003

he United States government is paying the Halliburton Company an average of $2.64 a gallon to import gasoline and other fuel to Iraq from Kuwait, more than twice what others are paying to truck in Kuwaiti fuel, government documents show.

Halliburton, which has the exclusive United States contract to import fuel into Iraq, subcontracts the work to a Kuwaiti firm, government officials said. But Halliburton gets 26 cents a gallon for its overhead and fee, according to documents from the Army Corps of Engineers.

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The cost of the imported fuel first came to public attention in October when two senior Democrats in Congress criticized Halliburton, the huge Houston-based oil-field services company, for "inflating gasoline prices at a great cost to American taxpayers." At the time, it was estimated that Halliburton was charging the United States government and Iraq's oil-for-food program an average of about $1.60 a gallon for fuel available for 71 cents wholesale.

But a breakdown of fuel costs, contained in Army Corps documents recently provided to Democratic Congressional investigators and shared with The New York Times, shows that Halliburton is charging $2.64 for a gallon of fuel it imports from Kuwait and $1.24 per gallon for fuel from Turkey.

A spokeswoman for Halliburton, Wendy Hall, defended the company's pricing. "It is expensive to purchase, ship, and deliver fuel into a wartime situation, especially when you are limited by short-duration contracting," she said. She said the company's Kellogg Brown & Root unit, which administers the contract, must work in a "hazardous" and "hostile environment," and that its profit on the contract is small.

The price of fuel sold in Iraq, set by the government, is 5 cents to 15 cents a gallon. The price is a political issue, and has not been raised to avoid another hardship for Iraqis.

The Iraqi state oil company and the Pentagon's Defense Energy Support Center import fuel from Kuwait for less than half of Halliburton's price, the records show.

Ms. Hall said Halliburton's subcontractor had had more than 20 trucks damaged or stolen, nine drivers injured and one driver killed when making fuel runs into Iraq.

She said the contract was also expensive because it was hard to find a company with the trucks necessary to move the fuel, and because Halliburton is only able to negotiate a 30-day contract for fuel. "It is not as simple as dropping by a service station for a fill-up," she said.

A spokesman for the Army Corps of Engineers, Bob Faletti, also defended the price of imported fuel.

"Everyone is talking about high costs, but no one is talking about the dangers, or the number of fuel trucks that have been blown up," Mr. Faletti said. "That's the reason it is so expensive." He said recent government audits had found no improprieties in the Halliburton contract.

Gasoline imports are one of the largest costs of Iraqi reconstruction efforts so far. Although Iraq sits on the third-largest oil reserves in the world, production has been hampered by pipeline sabotage, power failures and an antiquated infrastructure that was hurt by 11 years of United Nations sanctions.

Nearly $500 million has already been spent to bring gas, benzene and other fuels into Iraq, according to the corps. And as part of the $87 billion package for Iraq and Afghanistan that President Bush signed last month, $18.6 billion will be spent on reconstruction projects, including $690 million for gasoline and other fuel imports in 2004.

From May to late October, Halliburton imported about 61 million gallons of fuel from Kuwait and about 179 million from Turkey, at a total cost of more than $383 million.

A company's profits on the transport and sale of gasoline are usually razor-thin, with companies losing contracts if they overbid by half a penny a gallon. Independent experts who reviewed Halliburton's percentage of its gas importation contract said the company's 26-cent charge per gallon of gas from Kuwait appeared to be extremely high.