Sept. 4 (Bloomberg) -- An attack on an oil pipeline near the southern Iraqi city of Basra today will ``greatly reduce'' exports from the country's Persian Gulf oil terminals, said Jabbar al-Leaby, director-general of state-run South Oil Co.

``The attack on the pipeline, an act of sabotage, will greatly reduce exports,'' said al-Leaby in an interview from Basra, southern Iraq's regional capital. The full extent of the damage may not be known for days, he said.

Iraq exports 90 percent of its crude oil from the Persian Gulf ports of Basra and Khor al-Amaya. Repeated sabotage by opponents of the U.S.-led coalition and the Iraqi government have interrupted exports, helping drive oil prices to a record.

Crude oil for October delivery rose 1.9 percent this week to $43.99 a barrel. That's 49 percent more than a year ago. Yesterday the price slipped 7 cents a barrel as concern eased about possible disruptions to shipments from Russia and Iraq.

Today's attack happened at about 8:30 a.m. in Harithah on the pipeline running from the town of Nahr Omar and the Zubeir oil fields, Agence France-Presse said, citing police colonel Nuri Jaafar Fayad.

The attack comes less than two days after a pipeline in northern Iraq, running from Kirkuk to the Turkish Mediterranean port of Ceyhan, was hit, halting shipments to the port. The pipeline had been pumping between 600,000 and 800,000 barrels a day, Agence France-Presse reported.

Achilles' Heel

``Clearly the insurgents, who are not one group of people, have identified the Iraqi oil facilities as the Achilles' Heel of the government, which they want to bring down,'' said Youssef Ibrahim, managing director of Dubai, United Arab Emirates-based Strategic Energy Investment Group.

Exports through Iraq's two southern terminals on the Persian Gulf weren't affected by the attack as of 9:00 a.m., said three local shipping agents who declined to be identified. Shipping agents handle tankers calling at the terminals.

Three vessels, the Namur, Crude Progress, and Guru Gobind Singh were loading at a combined rate of 90,000 barrels of oil an hour from the Basra and Khor al-Amaya terminals, more than yesterday's rate of 70,000 barrels of oil an hour, the agents said. Two other vessels, the Eco Africa and Hyundai Banner, are berthed at the terminals waiting to load, they said.

Iraqi exports through the southern oil terminals were pumping Thursday at a rate equivalent to 1.9 million barrels a day, close to maximum capacity, local shipping agents said.

Iraq's oil exports in August fell to the lowest in 10 months after a pipeline in the south was shut for about two weeks. Shiite Muslim militia had threatened to attack the system.

Oil Reliance

Declining exports from Iraq, the Middle East's fifth- largest oil producer in July and the world's third-largest holder of oil reserves, helped push oil prices on the New York Mercantile Exchange to a record $49.40 a barrel on Aug. 20.

Iraq relies on oil sales for almost all its foreign exchange. The country's oil exports fell in July for a fourth month, to 1.34 million barrels a day, down 5.6 percent from 1.42 million, according to data collected by local shipping agents. That compares with a daily average of 1.8 million in April, the highest since the U.S.-led invasion last year.

Shiite Muslim militants loyal to cleric Moqtada al-Sadr set oil pipelines and oil fields on fire last month as part of a standoff with the U.S.-led coalition and Iraqi forces in the southern city of Najaf. Insurgents also set fire to the headquarters and warehouses of South Oil Co., which operates pipelines and terminals through the Persian Gulf

To contact the reporter on this story: Dania Saadi in the Dubai bureau on dsaadi2@bloomberg.net

Last Updated: September 4, 2004 09:32 EDT