The attack comes on the back of ongoing clashes between US and Iraqi forces against Moqtada and his Al Mahdi militia in Shiite holy city of Najaf.

Reports from wire services indicate the insurgents broke into South Oil’s compound late on Thursday, drove off the facility’s security guards in a raging gun battle and then shot rocket-propelled grenades at the warehouses which stored drilling equipment and other gear.

AP, citing an anonymous official, said, “The militants battled with the guards, and they broke into the main gate, encircled all the fences surrounding the company and set everything on fire.”

The subsequent fires, which reportedly brought about the destruction of 10 warehouses, could not be put out by the emergency services as they too came under the fire by the militia.

In a related report, an aide to Moqtada confirmed his group has set fire to pipelines in southern Iraq in support of the cleric and to thumb their noses at Iraq’s interim Minister of State Qassem Dawoud.

In an interview with the banned Al-Jazeera satellite TV news provider Sheikh Aws al-Khafagi said, “After the so-called Iraqi Minister of State declared the ultimatum, residents in southern Iraq, mainly in Basra and Amarah, have exploded several pipelines and are threatening to set on fire all the oil wells in the south.”

Aws was referring to a declaration which Qassem earlier released which stated, “An attack against militants loyal to Moqtada in Najaf [will] be launched within hours unless Moqtada meets demands laid down by the interim government”.

Iraq’s southern pipelines account for 90% of the country’s output.