Oil Exports From Iraq Continue To Stagnate, While Revenues Continue To Benefit From International Tensions
By Joel Wing*
Since the second half of 2011, Iraq’s oil exports have stagnated, but revenues have remained high. That’s because of a combination of bottlenecks in the country’s infrastructure, bad weather, and occasional attacks by insurgents. At the same time, tensions in the Middle East continue to keep prices high for petroleum, meaning that Iraq has not lost out in profits despite the problems with its oil industry. That’s about to change this year as the country has finally completed the first part of its expansion program in the southern port of Basra, and has other big plans to boost exports.
In January 2012, Iraq’s oil exports declined, but profits increased, a trend that was seen throughout 2011. In January, the country exported an average of 2.107 million barrels a day. That was down from 2.145 million barrels the previous month. Both of those marks were below the average for 2011, which stood at 2.16 million. Basra continued to be the workhorse for the country, exporting 53.1 million barrels for the month, compared to just 12.2 million through the northern pipeline to Turkey. In total, Iraq exported 65.3 million barrels, down from 66.5 million in December. Iraq was still able to bring in large profits however. A barrel of Iraqi crude sold for $109.081 in January, compared to $106.18 in December. That meant while foreign sales declined, profits went up from $7.061 billion in December to $7.123 billion the next month. That was the highest price since April 2011, and the largest revenues since August. Prices can be expected to stay up for the foreseeable future with the continued tensions in the Middle East. The latest example is the new sanctions against Iran, and Tehran’s threats of retaliation. On February 19, for instance, Iran announced it was cutting exports to England and France, because of new European trade restrictions. Iran has also threatened to shut down the Straight of Hormuz. While these moves have mostly been symbolic, it still spooked international traders and markets, leading to oil prices staying high. This will obviously benefit Iraq, which depends upon petroleum for 95% of its revenue. At the same time, exports have hit a wall. In the first half of 2011, exports climbed to an annual high of 2.27 million barrels a day in June. After that they steadily declined to the current rate. That’s why in the first half of last year, Iraq averaged 2.19 million barrels a day, but then 2.13 in the second part.
Iraq Oil Exports And Profits 2011-2012
Avg. Price Per Barrel Revenue (Mil) Jan. 11 2.16 $90.78 $6.082 Feb. 2.20 $98.44 $6+ Mar. 2.15 $107.13 $7.167 Apr. 2.14 $114.26 $7.342 May 2.22 $108 $7.45 Jun. 2.27 $105.16 $7.173 Jul. 2.16 $108.80 $7.3 Aug. 2.19 $104.92 $7.124 Sep. 2.10 $104.89 $6.619 Oct. 2.08 $104.43 $6.742 Nov. 2.13 $106.59 $6.833 Dec. 2.14 $106.18 $7.061 2011 2.16 $104.96 $6.907 Jan. 12 2.10 $109.08 $7.123
Iraq has big plans to boost its oil output in the coming years. That started with the February opening of a new single point mooring station in Basra. That was supposed to start operating in January, but testing and bad weather were blamed for the delay. The new floating terminal has a capacity of 850,000 to 900,000 barrels a day. Three more are planned by 2013. When all four start working it will increase the country’s export capacity to 3.4 million barrels a day. There are also plans for two new undersea pipelines, one offshore pipeline, and another mooring point that will cost an estimated $1.3 billion. Basra currently has two export terminals with a capacity of 1.7 million barrels. Three major fields in the province, Rumaila, West Qurna 1, and Zubayr are expected to account for most of the added production. The Oil Ministry also wants to boost capacity in the north from 600,000 barrels a day to 1.3 million by the end of 2014. That would come from the Kirkuk, Bai Hassan, and Jambur fields in Tamim, the Ajeel and Hamrin fields in Salahaddin, and the Qayara and Najma blocs in Ninewa. There is also talk of building a new pipeline or repairing the old one to Syria. Overall, the government wants to raise production to 3.4 million barrels a day and exports to 2.6 million barrels this year. It also has plans for a fourth bidding round for 12 oil and gas fields to be held in May. After Iraq had two auctions in 2009, and attracted a large number of foreign energy companies to the country, it immediately set out to drastically expand all aspects of its oil industry. The problems as ever are execution and capacity on the part of the Oil Ministry.
Basra recently opened a new mooring point to increase the flow of oil exports in Feb.
Iraq still has huge potential for growth, but it’s unlikely to reach anything that the government talks about. For one, Iraq has never achieved its production goals. In 2011, it wanted to reach 2.74 million barrels a day, but only produced 2.54 million barrels. It also needs to build new storage facilities and pipelines to end the constant bottlenecks it faces. In November 2011 for instance, it produced six times as much oil as it could export. Iraq also has a bad record of finishing anything on time. The fourth bidding round has been delayed four times, and the new mooring point opened a month late. The Oil Ministry has also refused to install all of the necessary meters on the industry to keep accurate numbers on production and exports. That’s likely due to a lack of money and corruption within the agency. All together, that places a large number of barriers before the country to reach any of its lofty numbers. Still, with the completion of each infrastructure project Iraq’s capacity will go up, and so will its revenues with the continued high prices for oil.
With an MA in International Relations, Joel Wing has been researching and writing about Iraq since 2002. His acclaimed blog, Musings on Iraq, is currently listed by the New York Times and the World Politics Review. In addition, Mr. Wing’s work has been cited by the Center for Strategic and International Studies, the Guardian and the Washington Independent.
Last edited by Honugirl; 02-29-2012 at 10:46 PM. Reason: Added link
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