Iraq considers oil export options
As plans are made to rebuild its oil pipeline to Turkey, Iraq is hoping to open export routes to Iran and Jordan
Iraq, despite many security and economic problems, has witnessed major success in some aspects of its energy sector. Oil exports have risen from less than 1m barrels a day in 2003 to around 3.5m b/d at the end of 2017. The problem is that for most of this period, the overwhelming volumes of exports were through Basra in the south of the country. With oil production capacity rising, the Basra facilities are beginning to strain under the load. New ways of getting Iraqi oil to market are needed.
Exports through the Iraq-Turkey Pipeline (ITP) to Ceyhan on the Mediterranean coast stopped in 2014 when a section inside Iraq was destroyed by the Islamic State (IS) group. At the same time, Kurdish Peshmerga forces took control of the Avana Dome of the Kirkuk oilfield and the Bai Hassan field from the state-controlled North Oil Company (NOC). For a time, NOC exported small volumes of oil from other fields through the infrastructure set up by the Kurdish Regional Government (KRG) to link up with the ITP, but for long periods the only oil sold was through Basra.
With the Avana Dome and Bai Hassan back in NOC hands after the Iraqi offensive last year to drive out the Peshmerga, Baghdad is reviewing its options. One plan is to seek investors to build a new pipeline connecting Kirkuk with the operating section of the ITP at Fishkhabour on the Turkish border. But the new pipeline isn't likely to be completed before end-2020.
At the end of February, Prime Minister Haider al-Abadi said agreement had been reached with the KRG to export northern Iraqi crude oil through the Kurdish export system. But the KRG itself hasn't confirmed the deal, which is likely to become enmeshed in the broader dispute between Baghdad and Erbil. Indeed, shortly after Abadi's announcement of an agreement, Iraqi Kurds were incensed by the Iraqi parliament's approval of the 2018 budget. This decreased the share of state revenue allocated to the KRG from 17% to 12.67%. Kurdish deputies boycotted the session and several have called for a cut in all ties with the federal authorities.
1m b/d—Capacity of planned Jordan pipeline
Another option agreed in principle is to truck up to 60,000 b/d of crude oil across the border into Iran. This route was scheduled to open up in February, but the start was delayed because of security concerns inside Iraq.
Plans for an export pipeline through Jordan have been on the drawing board for several years and have attracted renewed interest of late. During the Saddam Hussein era, Jordan received Iraqi crude oil at a discount price, trucked across the border to the Zarqa refinery. In 2013, a detailed agreement was signed that envisaged a pipeline running from Basra westwards through Anbar province and then south to Aqaba on Jordan's Red Sea coast. A spur line was to transport oil to the Zarqa refinery. Completion was set for mid-2017. But the IS insurgency in western and northern Iraq the following year put paid to that scheme.
Instead, new plans were drawn up for a pipeline to run, again from Basra to Aqaba, but staying close to the border with Saudi Arabia to avoid Anbar. The capacity of the pipeline would be 1m b/d, with 150,000 b/d for Jordan and the rest for export.
The Jordanian cabinet in February gave its approval in principle to the scheme. But a government statement didn't say how much it would cost, how the financing would be arranged and when the project might begin. Earlier reports spoke of the venture costing around $15bn, proceeding on a build-operate-transfer basis.
Even though security in Iraq has improved following the military defeat of IS, potential private investors are likely to think twice before committing to a project that would be vulnerable to sabotage. Finding new and safe outlets for Iraqi oil isn't proving easy.