Analysis of Iraq’s Crude Oil Export Infrastructure

Iraq holds around 144 billion barrels of proved crude oil reserves and has been the second largest crude oil producer in OPEC in the recent past. Moreover, according to industry analysts the country intends to increase its crude oil production from the current level of around 3.5 million barrels per day to close to 9 million barrels per day by 2020! To that end, Iraq’s Ministry of Oil has signed contracts with various International Oil Companies to develop its hydrocarbon rich oilfields, especially West Qurnah, Zubair & Kirkuk.

However, while production capacity growth is expected to surpass all past records, I have my doubts about the export infrastructure of the country. Till 2007, the country’s infrastructure was in a horrible condition. The major export terminals of the south – Al Basrah & Khawr Al Amaya which were exporting about 95 % of the 1.6 million barrels per day, were serviced by age old corroded pipelines. In 2007, the Ministry of Oil realized the seriousness of the situation and conceptualized the ICOEEP to increase the southern export capacity by around 4.5 million barrels per day by 2013. The plan was to install 5 new off-shore structures called Single Point Mooring Systems (SPMs) to load crude oil onto tankers & export it via sea. Unfortunately, the country’s exports from the south averaged only around 2.47 million barrels per day in 2014. Another 0.13 million barrels per day were exported to Turkey via the pipelines of hell viz. pipelines in & around ISIS held territories in the North.

The off-shore SPMs aren’t the culprits here; three of them (900,000 bpd loading capacity each) are already operating and the fourth one is waiting to get oil from the Al FAO storage terminal on the shore. The problem lies with Iraq’s inadequate storage, pumping & pipeline capacity (midstream infrastructure). According to on field research conducted in Iraq, the country does not have more than seven days of storage capacity. The pipeline infrastructure is, in my opinion (on the basis of secondary research), another problem & so is inadequate pumping capacity, which prevents pipelines from being utilized at full capacity. Apparently, export capacity has expanded at a greater rate than the midstream infrastructure.

Iraq's state-owned South Oil (SOC) aims to boost export capacity to 3mn b/d by the end of next year. On the whole, while Iraq’s Oil ministry plans to increase the export infrastructure facilities significantly in the next five years, only ‘time’ (Kāla in Hindi) almighty can tell about whether or not it will attain success in its noble endeavors.

- Jeet Juneja
  SIMSREE Finance Forum

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