Iraq has maintained limited crude exports and secured price premiums in the face of the closure of the strait of Hormuz by leaning more on northern outlets and limited overland routes. Shipments are now centred on the Iraq–Turkey pipeline and, to a lesser extent, on trucking through Syria and Jordan.
State-owned oil marketer Somo's director-general, Ali Nazar al-Shatari, said Iraq exported about 18mn bl of crude in March, generating revenues equal to roughly 28pc of February levels. This includes exports from the southern Basrah terminals during the first week of March, before loadings were halted by Iran's effective blockade of the Hormuz strait.
The Somo chief's figure implies exports of around 580,000 b/d in March and revenue of about $1.9bn, compared with around 3.6mn b/d and $6.8bn in February. Iraq's crude output is currently around 900,000–950,000 b/d, Argus estimates, with 700,000–750,000 b/d of that used domestically. Before the outbreak of the US–Iran war, Iraq's production was about 4.2mn b/d in February.
While other Mideast Gulf producers halted crude shipments through Hormuz more abruptly after the conflict started, Iraq managed to continue exporting from its southern terminals until 8 March, al-Shatari said. "With the escalation of threats… we increased the number of tankers waiting offshore to maximise loading," he said.
The effective closure of the strait has since forced Iraq's export focus north. Baghdad is now sending 150,000–200,000 b/d of Kirkuk crude from federally controlled fields in northern Iraq to the Turkish port of Ceyhan, and these pipeline flows could rise to 200,000–250,000 b/d, al-Shatari said.
In theory, Kirkuk exports could reach 400,000–430,000 b/d, he said, but that would require a restart of oil production in Iraq's semi-autonomous Kurdistan region, which has been shut by near-daily missile and drone attacks by Iran since the start of the war.
Iraq is finding stronger pricing for its Kirkuk grade in Europe than before the war. "Kirkuk crude is being exported at a premium… the European market is hungry," al-Shatari said. Firm demand and elevated prices are generating "excellent revenues", he added.
Keep on trucking
Baghdad is also trucking crude and fuel oil through Syria and Jordan, with initial cargoes reaching Mediterranean storage and export terminals, al-Shatari said. Before the war, Iraq had been trucking about 15,000 b/d to Jordan under a bilateral agreement.
Somo has signed a deal to export 50,000 b/d of Basrah Medium crude via Syria, with potential to truck more, al-Shatari said. He did not indicate whether these shipments have begun. Somo has also finalised contracts to truck about 650,000 t/month of fuel oil from April to June through Syria, sources told Argus.
Trucking crude "cannot match pipeline efficiency", al-Shatari said, citing logistical and cost constraints. Even so, it is being treated as both a crisis measure and a possible longer-term diversification option.
But these alternative routes provide only marginal relief for Iraq and have no material impact on the wider tightening of the oil market since the closure of Hormuz. "Demand today exceeds supply because of the closure of this vital corridor," al-Shatari said.
Crude prices have surged as a result. Somo estimates they could peak near $165/bl before easing to $120–125/bl. Higher prices have partly offset Iraq's lower export volumes. "The price has doubled compared to before the war… meaning revenues from smaller volumes can still be significant," al-Shatari said.
Baghdad is exploring further bypass routes, including the use of pipeline networks in neighbouring Gulf states to move crude outside Hormuz, al-Shatari said, without giving details.
Iraq is also leaning on its established buyers. "Our buyers have taken on risk… these partnerships are what allowed exports to continue under such conditions," he said.
