Iraq is "unlikely to export more crude" in the near term, but a reduction in its refined product import bill should free up investment for upstream capacity growth longer term, according to Iraqi finance minister Ali Allawi.
Iraq's reliance on oil product imports will fall when the country's new 150,000 b/d Karbala refinery comes on stream next year, Allawi told Washington-based think tank the Atlantic Council. "We are major importers of petroleum by-products because domestic refining is insufficient. So, as much as we are able to save on imports, there will be more resources available [to invest in crude capacity]," he said.
Iraq has been struggling to meet its Opec+ crude production quota of late. It fell 130,000 b/d short of its 4.37mn b/d target in March, according to Argus estimates.
Allawi defended Iraq's continued commitment to Opec. "The argument why Iraq should stay in Opec has been reaffirmed recently," he said, pointing to the fact that rising oil prices have more than offset the financial impact of the group's production cuts implemented in 2020. "Opec's oil cutbacks, which were driven mainly by Saudi Arabia, is a successful policy undoubtedly, and played a part in raising oil prices way beyond our production cutbacks," he said.
The wider Opec+ coalition has been urged repeatedly by major consumer nations such as the US to unwind its cuts more rapidly to soften oil prices and help guard against any supply disruptions stemming from Russia's invasion of Ukraine. But the group has stuck to its guns and followed its previously agreed strategy for gradual monthly increments, straining relations between Washington and Saudi Arabia, Opec's largest producer.
Allawi sought to avoid blame for high energy prices, saying Iraq is "basically a follower and does not set policy in Opec". But the minister did acknowledge, albeit apologetically, that Opec has been "a successful cartel" and that it would be "rather foolish to pull out from a successful cartel".
Gas arrears
Allawi also raised the problem of paying for Iranian gas imports, which account for 30pc of Iraq's electricity production. US sanctions against Tehran mean Baghdad's payments are frozen in Iraq's central bank, putting it in arrears with its neighbour.
Allawi said his visit to Washington this week for the annual spring meetings of the IMF and the World Bank is in principle aimed at strengthening "relations with international institutions", but the minister said he will also hold talks with the US Treasury about "important outstanding issues not necessarily related to American economic support". These talks could broach the subject of Iran's frozen funds in Iraq.
Iraq remains "gas deficient and will need to continue importing to meet its needs", Allawi said, possibly hinting at the need to maintain gas imports from Iran regardless of the outcome of the now-stalled talks to revive the Iran nuclear deal. The US has been encouraging Iraq to further develop its domestic production to cut gas and electricity imports from Iran. But US development finance for Iraq has been limited to projects that capture flared gas or extend transmission lines to Iraq's Mideast Gulf Arab neighbours.
Iraq's gas flaring is down by "nearly a third after the full operation of Iraq's Shell-led Basrah Gas", Allawi said, adding that flaring will be reduced by another 30pc over the next four years as TotalEnergies gets involved in major gas gathering projects.
