In March 2011, Iraq’s oil exports dropped 2% compared to the previous month. Due to the increasing price of crude however, the country continued to rake in huge profits. The country is also benefiting from the work of foreign firms, but they are running into some problems. As long as the crisis in the Middle East and North Africa continues, Iraq can be counted on to maintain high revenues in the short-term, but it needs to develop its oil industry to ensure the long-term health of its economy.
March showed that Iraq is still vulnerable to fluctuations in weather and insurgent attacks. Last month the country exported an average of 2.159 million barrels a day. That was down 43,000 barrels from the 2.202 million exported in February, and the lowest amount since December 2009 when an average of 1.95 million barrels were shipped to foreign countries. The main reasons for the dip were bad weather in southern Iraq and an attack upon the pipeline to Turkey. On March 8, the northern pipeline was bombed in Ninewa province, knocking it out for several days. In mid-March, there were high winds that made it difficult for ships to dock at the Basra port. On March 11 for example, exports from the south were cut to 840,000 barrels a day, and then the next they rebounded to 1.68 million. Insurgents are most active in central and northern Iraq and continue to carry out operations against the oil infrastructure every couple months. Weather is also an on-going problem. The former is more of a nuisance as militant attacks are only capable of shutting down the flow of oil for a few days. Conditions in the Gulf are uncontrollable and unpredictable, and can only be countered by improved and larger port facilities in Basra, which are still years away.
Iraqi Oil Exports January 2010-March 2011 (Avg. million barrels per day)
2010 Avg. 1.89
2011 Avg. 2.17
Still, 2011 has seen the highest exports since the 2003 invasion. The annual average has been 2.17 million barrels a day for the first three months of the year. The previous high was in 2009 when Iraq exported an average of 1.90 million barrels. The main reason for the growth is the work of international oil companies, which re-entered the market after two bidding rounds in 2009. Beginning in February 2010, Kurdistan was also allowed to export oil again, and was up to around 80,000 barrels a day by the beginning of April. The development of the southern oil fields, which hold the vast majority of Iraq’s reserves, will hopefully help Iraq return to its former position as a major oil power in the long run. The disputes between Kurdistan and Baghdad have not been resolved, so there’s no telling how long the Kurdish exports will last.
Overall production has been up in 2011 compared to 2010, but inconsistencies continue. In January 2011 Iraq produced 67.0 million barrels. The next month that dropped to 61 million barrels. It then went back up to 66.929 million in March. Those were all above 2010’s annual average of 57.4 million. The country’s oil output has always gone up and down. The current issues could be the result of the foreign companies running into some difficulties. In January for example, it was reported that British Petroleum and the China National Petroleum Corporation (CNPC), which are developing the Rumaila field in Basra, had a drop in production from an average of 1.29 million barrels a day to as low as 280,000 on some days. In February it also had to shut down several wells because of a lack of pressure. Some analysts have noted that quickly boosting production was always going to be easy in Iraq. The hard part is repairing the deteriorating infrastructure, and the government building new pipelines and terminals to increase the export capacity.
At the same time Iraq is benefiting from the upheavals in the region, which are boosting the international price of oil. In March, Iraq earned over $7 billion in profits. That compared to $6.064 billion in February, $6.082 billion in January, and $5.222 billion in December. The price of a barrel of Iraqi crude also finally broke the hundred-dollar mark in March at an average price of $106.50. Last month, it was selling for $97.50. Until the unrest in places like Libya subside, Iraq will be an unintended beneficiary with huge profits each month.
In the coming months, Iraq can be expected to continue to see ups and downs in production and exports. That’s always been the case, however prices are expected to rise, and revenues right with them in the short-term. What is yet to be seen is just how much the country can develop its most important industry. That’s what is really important because oil prices will always fluctuate, and eventually go down from their current high. Iraq therefore has to increase its capacity so that it can rake in as much as it can in the boom times to try to compensate for the lean ones, especially since it is the most oil dependent country in the region.
Agence France Presse, “Bombed Iraqi pipeline to be fixed ‘in five days,’” 3/10/11
Dow Jones, Reuters, AK News, “Iraq Oil Exports Down 2% on March,” Iraq Business News, 4/4/11
Rasheed, Ahmed, “ANALYSIS-Tougher times ahead for oil firms in Iraq,” Reuters, 1/24/11
- “Iraq’s Basra oil exports restored to 1.68 mln bpd,” Reuters, 3/12/11
- “Iraq’s key Rumaila oilfield faces challenge as output starts to slump,” Reuters, 3/5/11
Xinhua, “Iraq oil exports bring in 7 bln USD in March,” 4/6/11