By Aref Mohammed
BASRA, Iraq (Reuters) - Old pictures hanging on the walls of restaurants show canals flowing through the handsome streets of the southern city of Basra, which Iraqis used to call "The Venice of the Middle East."
The present has little resemblance to that colourful past.
Now, Basra's criss-crossed canals are filthy pools of stagnant water filled with heaps of rubbish. Roads are damaged and only a few hours of electricity are provided every day to a city where summer temperatures top 50 degrees Celsius (122 F).
Most of Iraq's oil exports come from the fields around Basra, but residents complain they have seen little benefit.
A recent series of huge oil deals that Baghdad struck with global firms to develop its vast reserves has generated much hype as oil and service companies build bases in Iraq's desert.
Basra is struggling to accommodate the tide of activity the deals unleashed. And like the rest of Iraq, it has a long way to go until the anticipated spike in revenue has a noticeable effect on the economy and on people's daily lives.
"When we heard that foreign companies will come to work in Basra, I said to myself, now I will have the chance to prove myself and have a decent job. But later I discovered I was wrong," said 25-year-old Muntadhar Mohammed, a university graduate with a bachelors' degree in computer science.
"Iraqi officials know that we dream of having a better life after toppling Saddam, so they started to sell those dreams to us," said Mohammed, who runs an Internet cafe in Basra. "But all their promises of having a better life are only a mirage."
More than seven years after the ouster of dictator Saddam Hussein, many Iraqis were betting on the wealth those oil deals could bring to shake off a legacy of violence and poverty after years of sectarian slaughter and economic decline.
To fulfil the promise, Iraq needs to boost its output and export levels to generate the cash needed to rebuild.
"You would need to have first the revenue and second you would need to have the institutional framework to channel the revenue to the proper sectors and to the rest of the population," said Leila Benali, Middle East and Africa director for IHS Cambridge Energy Research Associates.
"And that is something which a lot of exporting countries have struggled with," she said.
Recent protests against crippling power shortages in Basra and other cities, mainly in the deprived Shi'ite south, highlighted Iraqis' frustrations and the government's failure to provide basic services despite the anticipated oil wealth.
BATTERED BASRA BUZZING
Basra is weary after years of conflict. It was the front line in the war with Iran in the 1980s and more recently was in the grip of feuding Shi'ite militias, pushed out by U.S. and British-backed Iraqi government troops in 2008.
"Basra is going to have some serious growing pains over the next few years. The infrastructure is not there yet. The process for bringing equipment from Kuwait is opaque and bureaucratic," said Kyle McEneaney, who heads the Middle East practice at Ergo, an emerging markets consultancy.
"Basra is Iraq's second city and commercial link with the world; still, there aren't a great many places to stay in town."
Despite its dilapidated power and water infrastructure and scarcity of flights in and out of the city, Basra is buzzing, with investors, oil executives, contractors and consultants flooding its few hotels.
The oil deals Baghdad signed with global firms aim to boost crude output capacity to 12 million barrels per day (bpd) from 2.5 million bpd. That could put Iraq at par with oil powerhouse Saudi Arabia and shake the balance of power in the region.
The workload for oil and service companies is unprecedented. Iraq's ability to handle the work, with fragile security, widespread corruption and entrenched bureaucracy, is doubtful.
"There are thousands of tons of iron and cement needed for these contracts. There will be an influx of equipment into the country," said an executive who attended a recent meeting of the oil ministry and foreign companies in Baghdad.
"I don't think they know what they will be dealing with; it's huge."
GRAND PLANS
Iraq has grand plans to rebuild but lacks the funds and would need foreign investment if it wants to meet its ambitious production targets.
Old equipment and decaying pipelines can be seen at the southern fields of Rumaila and Zubair, among those included in the development contracts awarded to global firms such as BP, Royal Dutch Shell, China's CNPC and Italy's Eni.
Oil officials and engineers are trying to stitch together decades-old facilities and pipes while grappling with declining production rates and technical problems at the fields.
Foreign oil firms have a long list of complaints: insecurity, corruption, inconsistent customs procedures and bureaucratic hurdles to getting visas and setting up offices.
A two-day meeting in Baghdad between oil firms and government officials last month produced no clear steps to clear the bottlenecks, executives said.
Complaints about a lack of dock space at Basra's Umm Qasr port prompted Iraq to seek a deal with neighbouring Kuwait to open a border crossing to ease the inflow of equipment.
"Iraq is aware of its limitations, and is taking steps to address them, for example, in contracting to upgrade and augment its offshore export terminals," McEneaney said. "But the country certainly has a lot on its plate."
(Additional reporting by Rania El Gamal and Ahmed Rasheed; Writing by Rania El Gamal; Editing by Jim Loney)