Crude oil exports from Iraq is set to jump om 2019, said the country’s Oil Minister Thamer Ghadhban. He went on to add, Iraq is focused on boosting the output from its southern oilfields and is close to clinching a deal with international companies.
The shortfall in global oil supply, caused by U.S. sanctions on Iran, is yet to be gauged. Organization of the Petroleum Exporting Countries (OPEC) members are scheduled to decide on the course of action in their policy meeting next month.
Gauging the shortfall
Crude oil exports from Iraq, OPEC’s second-largest producer, is expected to touch 5 million barrels per day (bpd), up from its current 4.6 million bpd, in 2019; average exports are expected to reach around 3.8 million bpd.
In OPEC, Iraq is the second biggest producer of crude oil, after Saudi Arabia. The bulk of its oil is exported via its southern terminals, which account for more than 95% of the state’s revenue. This is why, ever since Ghadhban took over the ministry last month, capacity augmentation “is a top priority”.
“We have had talks with international companies which lasted for a while, but now we are about to reach a deal and will settle this issue soon,” said Ghadhban in reference to boosting Iraq’s crude oil exports.
These efforts come in the wake of the country facing years of violence, including at the hands of the Islamic State militants. This has wrecked the economy and the country’s infrastructures. It is in this scenario that Ghadhban, who replaced Jabar al-Luaibi as the country’s oil minister, is looking to diversify Iraq’s export outlets through new pipelines.
One such immediate challenge is to gauge the shortfall in global oil supply caused by U.S. sanctions on Iran’s crude oil exports. Ghadhban wants to play it slow. He wants to see an “actual decrease” before he decides along with his OPEC peers on how to deal with a scenario of reduced oil supplies.
“What will be the physical increase in demand on Iraqi oil… if there’s no demand, how can I say we’ll compensate?” said Ghadhban. As long as the price is above the “fair” amount of $70 per barrel, he is okay with it.
“I compare it with previous prices… when we talk about prices above 70… I say it’s a fair price, it’s not 30 or 50 and it’s not 100. In principle, the higher the price, the better for Iraq. But we’re not working alone, we’re a member of OPEC. We see the interests of consumers and we want to be a viable producer and exporter,” said Ghadhban in reference to boosting Iraq’s crude oil exports.
Diversify oil exports
U.S. sanctions have targeted Iran’s oil exports along with its banking and transportation sectors. The Trump Administration has threatened to tighten the grip so as to curb Teheran’s “outlaw” policies. Tehran views these steps as being equivalent to economic warfare and has vowed to defy.
The U.S. Administration has granted a waiver for select economic ties between the two countries, with Iraqi officials saying last week that Baghdad would continue to import gas and energy supplies as well as food items. Iraq could potentially use this route to boost its crude oil exports to Iran as well.
So far, Baghdad’s Oil Ministry has received bids from three foreign contractors to build a giant water treatment facility in Iraq. This will significantly boost the country’s oil production capacity, said Ghadhban.
He went on to add, once the multi-billion facility is operational, it would add an additional 1 million bpd to Iraq’s crude oil exports. Building new pipelines that connect the southern city of Basra with Jordan’s Red Sea port of Aqaba would “diversify our export outlets”.
A final deal will be hammered out with BP to boost output from oilfields around Kirkuk.
“I have met their representative (BP) yesterday and I hope very soon we reach an arrangement… it’s one of the priorities,” said Ghadhban.