An economist proposes urgent solutions to overcome the oil field shutdown crisis.
Economic expert Mohammed Al-Hassani confirmed on Tuesday that the closure of some oil fields in Iraq due to full storage tanks and the deteriorating security situation in the Kurdistan Region, coinciding with the disruption of exports through the Strait of Hormuz, represents a complex financial challenge that threatens the cash flows of the state, which depends on more than 90% of oil revenues.
Al-Hassani told Shafaq News Agency that “stopping production in major fields such as the Rumaila field or the northern fields doubles the daily losses, not only in terms of lost revenues, but also because of the technical costs of stopping and restarting the wells, as well as the risk of losing regular customers in Asian markets.”
He pointed out that “talking about (accelerating the sale) becomes of limited effectiveness in light of the disruption of one of the most important maritime routes, which necessitates focusing on financial and logistical alternatives, most notably using the temporarily available storage capacities to avoid closing more wells, in addition to the option of selling on credit by marketing future shipments with short-term contracts to secure immediate liquidity, which is a mechanism that allows the government to obtain advance payments in exchange for supplying subsequent quantities when exports resume, which helps to bridge the cash gap in the short term.”
According to Al-Hassani, another urgent solution is to reschedule unnecessary financial obligations, and to strengthen security coordination between Baghdad and Erbil to ensure the stability of the fields in Kurdistan and prevent the expansion of precautionary closures. He called for diversifying export routes and reducing reliance on a single corridor, and working to reactivate alternative lines such as the Kirkuk-Ceyhan line, in addition to expanding strategic storage capacities inside and outside the country.
Earlier on Tuesday, the Eco Iraq Observatory announced that Iraq is incurring losses estimated at about $128 million per day as a result of the halt in production at the Rumaila oil field and the Kurdistan Region fields, due to the repercussions of the war in the Middle East region.
A source in the state-owned North Oil Company, based in Kirkuk province, revealed earlier on Tuesday that exports of Kurdistan Region oil via the Turkish port of Ceyhan had stopped, following the suspension of work in some oil companies in the region.
Earlier today, informed local sources reported that oil production had stopped at Iraq’s largest oil field, the second largest oil field in the world, Rumaila, due to the military escalation in the Middle East.
Shafaq.com