Basra Oil Terminal
Source: Agence France Presse
Source: Agence France Presse
The oil facilities in Basra are in a sorry state. JJ Sutherland of National Public Radio recently relayed how he went to the Basra oil terminal in 2009. The engineers there said that they could not run the pipeline at full capacity because they were afraid it would burst, and they could not shut it down either for repairs because of trepidation that the underwater section would collapse under pressure from the sea. Back in October 2008, the U.S. Army Corps of Engineers and the state-run South Oil Company completed a study that found that the pipes in Basra could fail due to a lack of maintenance. (1) They estimated that it would take $5 billion to fix the problem.
In 2009 that the Oil Ministry came up with plans to expand and rehabilitate Basra’s infrastructure. First was the Iraqi Crude Oil Export Expansion project that will replace the current Basra oil terminal and pipelines, and increase capacity to 4.5 million barrels a day. Then there are plans to add four new floating terminals, three underwater pipelines, new oil and gas pipelines, reconstruct the Fao port, and rehabilitate the terminals at Khor Amaya. If completed these new facilities would boost Basra’s capacity from 1.6 million barrels a day currently to 8 million barrels. The expansion is to be completed in 15 months after work begins.
A major problem with this timeline is that oil production in southern Iraq is expected to expand dramatically very soon under the new contracts given to foreign companies in 2009 and 2010. The South Oil Company expects production to reach 1.925 million barrels a day by the first quarter of 2010, then 2.030 million by the second quarter, 2.149 million by the third, and 2.285 million barrels by the end of the year. There’s no way those numbers can be reached with the current infrastructure handling less than 1.6 million barrels, and the expansion plan not expected to be finished until early 2012. Some of this work needs to be fast tracked, but Iraq has a horrible record at doing anything major on time. That could mean an increase in bottlenecks, slow downs, and closures that already plague Basra for up to a year. That would put a major damper on the Oil Ministry’s ambitious goals to more than quadruple output.
1. Dombey, Daniel, “US warns on aging Iraqi oil pipelines,” Financial Times, 10/14/08
Al-Chalabi, Issam, “Iraq’s Oil Export Outlets,” Middle East Economic Survey, 11/30/09
Department of Defense, “Measuring Stability and Security in Iraq June 2010,” 9/7/10
Dombey, Daniel, “US warns on aging Iraqi oil pipelines,” Financial Times, 10/14/08
Dow Jones, Business Week, Reuters, Leighton International, “$733m Contract Awarded for Basra Oil Terminal,” Iraq Business News,9/28/10
Ebel, Robert, “Geopolitics and Energy in Iraq,” Center for Strategic and International Studies, August 2010
Reuters, “New Quarterly Production Targets for Basra’s Oilfields,” Iraq Business News, 9/7/10
Sutherland, JJ, “Iraq Raises Oil Reserves Estimates 25 Percent,” NPR, 10/4/10