Iraq is in talks with Iran to allow some of its oil tankers to pass through the strait of Hormuz, oil minister Hayyan Abdulghani said today, as the country struggles to restore crude exports.
Baghdad has had limited options since the effective shutdown of its southern export route, which handled around 3.4mn b/d of crude shipments from Basrah. Traffic through the strait of Hormuz has come to an almost complete halt since the US and Israel launched attacks on Iran at the end of February, with Tehran retaliating by targeting tankers and energy infrastructure across the Mideast Gulf region.
Iraq is simultaneously pursuing alternative export routes to the north, including pipeline flows to Turkey's Ceyhan port and trucking crude to Syria's Banias and Jordan's Aqaba ports, Abdulghani said.
Baghdad said it has cut crude production to 1.5mn-1.6mn b/d to prioritise domestic refining and electricity generation. Argus estimates output at closer to 1.2mn b/d. The country had been expected to produce 4.273mn b/d of crude under its Opec+ quota in March, implying that around 3mn b/d has been shut in.
One option is to restart flows from northern Kirkuk fields through a long-idled pipeline to Ceyhan, which could initially carry 200,000-250,000 b/d. Final inspections on the rehabilitated segment are expected within about a week, the minister said.
Baghdad and the Kurdistan Regional Government (KRG) are at odds over control of pipeline flows through the region. The federal oil ministry said the KRG refused to restart exports and attached conditions unrelated to the oil flows. The KRG rejected this, saying Baghdad was attempting to shift blame, and said production had already been halted following repeated missile and drone attacks on energy infrastructure carried out by militia groups.
The KRG also accused Baghdad of imposing what it described as a "suffocating economic blockade" on the region through restrictions on dollar access and trade flows.
Even if partial exports resume through these northern routes, the amounts involved would be far below Iraq's normal capacity and are unlikely to offset the loss of southern shipments.
