26/04/02
Iraq keeps crude exports alive for 'hungry' Europe
Iraq keeps crude exports alive for 'hungry' Europe
Doha, 2 April (Argus) — 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. By Bachar Halabi Send comments and
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