Monday, May 9, 2011

Oil Profits Up, Exports Down In April 2011 As Iraq Reaches Its Capacity

For the last two months Iraq’s oil exports have declined slightly. Weather and insurgent attacks were blamed for the recent decreases, but larger problems with the country’s infrastructure may also be at play. Despite the drop, Iraq is still raking in record profits, as international petroleum prices remain high due to the fighting in Libya.

In April 2011 Iraq recorded another record high in oil profits. It’s estimated that it earned $7.4 billion last month. That tops March’s $7.16 billion, and the $6 billion plus of January and February. In comparison, last year Iraq’s monthly revenue fluctuated between $3-$4 billion, before hitting $5.222 billion in December

Increasing world oil prices was the cause. In April Iraq sold its crude for between $112-$113 per barrel. That was up from $107.13 per barrel in March, the first time prices had broken the hundred-dollar mark since the world recession hit. The cost of oil has seen a dramatic rise since unrest started in the Middle East in December 2010, first with demonstrations that brought down the government in Tunisia, and that eventually spread to the rest of the region. The current fighting in Libya has greatly reduced that country’s oil production. At the beginning of May however, international prices took a dip below one hundred dollars, but analysts believe they will still remain high. 

Iraq’s record profits were made despite a small decline in exports. In April exports dropped 0.8% to an average of 2.141 million barrels per day. That was down from March’s average of 2.158 million barrels, and January and February’s post-2003 highs of 2.16 million and 2.20 million barrels a day respectively. Foreign sales decreased despite added production from Kurdistan. The Tawke and Taq Taq fields in that region are producing around 135,000 barrels a day currently, up from 86,000 in March and 69,000 in February

Bad weather and insurgent attacks were blamed for the two-month drop. Rough seas in Basra can prevent tankers from docking at the port there, and March saw a number of bombings of the northern pipeline that goes to Turkey.

Pipeline in Basra (BBC)
Larger problems, such as bottlenecks may be behind the decrease as well. British Petroleum (BP), Exxon Mobile, Eni, and Shell have all boosted output 10-20% in recent months at the fields that they won contracts for in 2009. Iraq’s infrastructure can’t handle the added production however. The Basra pipeline for example, that carries 80% of the country’s exports, can only take 1.8 million barrels a day, but the output capacity of the southern oil fields has reached 2.2 million. The Oil Ministry has plans to refurbish and expand the pipelines, ports, and storage facilities in Basra to increase capacity to 4.5 million barrels per day by the end of 2012. Until then, companies may have to regulate their production or store the excess for a later date. That may already be happening as BP was reported to have reduced production at the Rumaila field last month because of the bottlenecks in Basra.

Iraq’s oil production leveled off for three years beginning in 2008. The Oil Ministry did all that it could to repair and expand the industry after twenty years of wars and international sanctions. It could do no more by itself. In 2009, it therefore signed eleven petroleum deals with foreign companies. That has boosted output to new post-2003 highs. Now that too has apparently stagnated because Iraq’s aging pipes and ports cannot take anymore. The government’s plans don’t anticipate an increase in capacity until a year and a half from now, which will mean a new plateau. On the positive side, as long as oil prices remain high, the country can bring in high profits despite the problems with exports.

 Iraq's Oil Numbers 2010-2011
Month
Total Production
(Mil/Bar)
Avg. Exports
(Mil/
Bar/
Day)
Avg. Price Per Barrel
Revenue
Jan. 10
59.7
1.92
$73.97
$4.441
Feb.
57.9
2.05
$73.04
$4.229
Mar.
57.1
1.84
$76.20
$4.351
Apr.
53.0
1.80
$79.66
$4.222
May
58.7
1.88
$73.85
$4.335
Jun.
54.7
1.86
$71.10
$3.889
Jul.
56.3
1.82
$71.21
$4.009
Aug.
55.4
1.82
$71.43
$3.957
Sep.
60.6
2.02
$73.07
$4.428
Oct.
58.7
1.91
$77.10
$4.526
Nov.
57.3
1.92
$80.59
$4.618
Dec.
60.5
1.95
$86.31
$5.222
Jan. 11
67.0
2.16
$90.78
$6.082
Feb.
61
2.20
$98.44
$6+
Mar.
66.9
2.15
$107.13
$7.167
Apr.
N/A
2.14
$112-$113
Est. $7.4

 SOURCES

Agence France Presse, “Iraq pays Kurd oil contractors,” 5/6/11

Gulf News, “Iraq’s oil export revenue at record high this year,” 5/2/11

Hafidh, Hassan, “Iraq Tackles Its Next Oil Bottleneck,” Wall Street Journal, 4/24/11

Al-Khayat, Faleh, “Iraq’s northern oil output in March hits highest post-war level,” Platts, 4/25/11

Krauss, Clifford, “Price of Crude Oil Falls Again, but Analysts Warn It Will Remain at Lofty Levels,” New York Times, 5/6/11

Schmollinger, Christian and Koh, Ann, “Nomura Says Crude Oil Prices May Peak This Summer on Libyan Curbs, Demand,” Bloomberg, 5/5/11

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