Oil export routes – Iraq looks for a way out
To meet ambitious oil and gas production-expansion plans, mainly landlocked Iraq must rapidly develop and expand export pipelines if increased output is to reach markets, writes James Gavin
The early years of the post-Saddam Hussein period were scarred by repeated assaults on pipelines, with saboteurs focusing on the main northern export link, from Kirkuk to Ceyhan, Turkey. Security has improved, but the output targets require up to 9m barrels a day (b/d) of export capacity, needing huge investment in new pipelines and shipping terminals.
The country has only two significant, operational export links – the 0.5m b/d Kirkuk-Ceyhan pipeline and the 1.8m b/d Basra terminal, in the Mideast Gulf (around 100,000 b/d is exported by truck) – yielding only a fraction of the capacity needed to meet planned export volumes.
According to David Stanley, chief executive of pipeline-engineering consultancy Penspen, the original capacity of Kirkuk-Ceyhan was for up to 1.6m b/d, but the older 40-inch diameter line is almost redundant and the operating pressure of the second 46-inch pipeline is substantially reduced.
Iraq has two obsolete export pipelines: a 1.4m b/d link to Syria that is in disrepair – the Syrian sections are now used to transport gas; and the 1.7m b/d Ipsa pipeline to the Saudi port of Yanbu, which has been idle since Iraq's 1990 invasion of Kuwait. An internal pipeline between Haditha and Basra has capacity for 0.6m b/d.
The oil ministry's export plans rest on four large expansion projects. First, state-owned South Oil plans to upgrade capacity at Basra export terminal to handle 4m b/d by 2014 and up to 8m b/d by 2017. Another involves boosting Kirkuk-Ceyhan capacity to over 1m b/d in the next couple of years.
In October, Iraq signed a memorandum of understanding with Syria to build two pipelines to raise export capacity to the Mediterranean port of Banias to 2.75m b/d – 1.5m b/d of heavy oil and 1.25m b/d of light. While the fourth possible route is a 1m b/d pipeline from Haditha to Jordan, to replace the trucking of crude to the Zarqa refinery.
But to enable these export lines to operate, four substantial new pipelines will be needed, says Stanley: an additional strategic pipeline between Haditha and Basra; links between Haditha and the pump station IT-1 on the Iraq Turkey Pipeline (ITP); from Bin Omar, near Basra, north through Majnoon and Maysan, and then North West through east Baghdad to ITP; and from the fields in Najma and Qaiyara to IT-1.
"If all of these pipelines were developed, Iraq could achieve a total export capacity of nearly 14m b/d," says Stanley. But this will come at a substantial cost. Stanley estimates that some 7,000 km of new pipeline will be needed, mostly 48-inch, requiring investment of around $12bn.
Boosting export capacity also means forging regional alliances. But as most of its neighbours are competing oil producers this will prove tricky – even with nominally friendly regimes such as Iran. Then there are local sensitivities that must be carefully managed. And the government has already had its fingers burned.
The mid-November signing of a contract with South Korea's Kogas and Kazakhstan's KazMunaiGaz to develop the 5.6 trillion cubic feet (cf) Akkas gasfield, on the Syrian border, was postponed when local officials raised objections to plans to export the gas – the Anbar region is starved of regular power supplies. The oil ministry has been busy assuaging local concerns, confirming that only surplus gas would be piped to Syria.
The Akkas deal is part of a wider political agreement between Syria to develop an oil and gas pipeline corridor, including the two oil pipelines to Banias. The gas pipeline could ultimately feed the Arab Gas Pipeline, which links Egypt, Jordan and Syria.
Some experts are sceptical of Iraq's ability to meet its bold export pipeline targets. For one thing, the Iraq-Syria link will need private-sector finance, which may prove difficult. Former Iraqi oil minister Issam Chalabi predicts that it will take more than 10 years of hard negotiations before new pipelines to Syria are laid.
But, apparently undaunted, Iraqi officials are studying an offer to revive the Ipsa oil pipeline to Yanbu. Reports say Japan's Mitsubishi and Hungary's OTV, which built the original 626-km pipeline, are in talks to rehabilitate it.