Wednesday, August 8, 2012

Iraq’s Oil Exports And Profits Bounce Back From Two-Month Decline In July 2012

Iraq’s oil output has always gone up and down, and this summer has been no different. In July 2012, the country hit a new post-2003 high in exports, while prices and profits rebounded as well. Both had been declining in recent months after seeing a steady increase in the beginning of the year. Iraq is finally benefitting from the work of foreign oil companies, and new infrastructure starting operation, but there are still major bottlenecks and an aging field hindering output.

July 2012 saw a decided increase in Iraq’s exports. For the month, the country averaged 2.516 million barrels a day in exports, up from 2.403 million barrels in June. That was the highest amount since the 2003 invasion. The fields in southern Iraq were the cause for the uptick. They averaged 2.216 million barrels through the Basra port, a 131,000 barrel increase from the previous month. This was despite the government planning on reducing the flow of oil through the southern line. Bad weather also slowed tankers docking in Basra at the beginning of July, but it didn’t seem to have an impact by the end of the month. Production at the southern fields has ramped up after two new mooring points opened at the southern port, and a new onshore pipeline from the Zubair field to al-Faw opened, helping with some bottlenecks. In comparison, the northern line to Turkey only exported an average of 300,000 barrels a day. That was the fourth straight drop since March. Last month witnessed a bombing of the pipeline in Turkey, allegedly by the Kurdistan Workers’ Party (PKK) that took three days to repair accounting for some of the decline. More importantly, the Kurds ended their exports through the pipeline on April 1 over a payment dispute with Baghdad, and the Kirkuk oil field has been declining in production. The Oil Ministry has been negotiating with British Petroleum over renovating Kirkuk, but those talks have been delayed due to disputes between Baghdad and Kurdistan over who has control of the field. Overall, the increase in exports meant that Iraq became OPEC’s second largest producer, surpassing Iran, which is facing international sanctions. Iraq has always witnessed these ebbs and flows. The country suffers from a number of weather, infrastructure, and terrorist related problems that constantly affect production and exports. The two new mooring points in Basra for example, can’t operate simultaneously because of pumping and pipeline issues, which reduces their capacity of 1.8 million barrels a day to half that. That means despite huge increases in production in the south, Iraq is not always able to take advantage of it. July marked a high point for the post-Saddam era, but that doesn’t mean that it can be maintained. 

Iraq Oil Exports And Profits 2011-2012
Avg. Price Per Barrel
Revenue (Bil)
Jan. 11
2011 Avg.
Jan. 12

Oil Exports Through Basra 2012
January 1.711 mil/bar/day
February 1.639 mil/bar/day
March 1.917 mil/bar/day
April 2.115 mil/bar/day
May 2.086 mil/bar/day
June 2.085 mil/bar/day
July 2.216 mil/bar/day

Oil Exports Through Kirkuk 2012
January 395,000 bar/day
February 375,000 bar/day
March 400,000 bar/day
April 393,000 bar/day
May 366,000 bar/day
June 318,000 bar/day
July 294,000 bar/day

Prices for Iraqi crude recovered in July. The price for a barrel of Iraqi oil went up to $96.50 last month, up from June’s $90.09, which was the lowest since January 2011. That helped the country earn around $7.5 billion. That was another increase as profits had been declining for the previous two months. The problem is that Iraq, Kuwait, and Libya have all increased their output this summer, flooding international markets. That means that Baghdad’s plan to become one of the largest oil producers in the world is in a collision course with the current state of the world economy. If it was to achieve its goal it would likely lead to an even larger drop in prices. Iraq’s government is notoriously bad at planning, so it’s unlikely that it will change direction, and continue with its program despite its possible negative affects.

Iraq’s oil industry can expect to see continued growth, but its exports will go through fits and spurts. The Oil Ministry is supposed to be addressing more of the bottleneck problems, but those solutions will probably take a while to come on line. The Kurdish Regional Government (KRG) has also recently restarted exports. It’s four month stoppage has achieved little, and it is under pressure from the oil companies operating there to come to a long-term agreement with the central government to allow for foreign sales, so that they can be paid. At the same time, the war of words between Baghdad and Irbil over oil policy has only increased. The Kurds want to follow their own independent plans, while the central government demands control over all natural resources. Despite this dispute, the Oil Ministry has never objected to Kurdistan exporting as long as the terms are worked out between the two sides. That means Iraq could see another boost in the coming days.


Ajrash, Kadhim and Razzouk, Nayla, “Iraq Says Exported 2.52 Million Barrels a Day of Oil in July,” Bloomberg, 8/1/12

Aswat al-Iraq, “Iraqi oil June revenues reached to 6.486 billion dollars,” 7/24/12

Hafidh, Hassan, “Iraq Resumes Oil Flow to Turkey at Lower Rate – Shippers,” Dow Jones, 7/23/12

Lawler, Alex, “Iraq Kurdistan oil export restart may be temporary,” Reuters, 8/2/12

Nguyen, Lananh, “Iraq Crude Production Overtakes Iran as OPEC Trims Output,” Bloomberg, 7/11/12

Reuters, “Iraq Basra oil exports cut due to weather,” 7/6/12
- “Iraq’s key economic indicators,” 7/8/12
- “Iraq’s Kurdistan restarts oil exports – source,” 8/7/12

Shafaq News, “SOMO announces Iraq’s oil exports rise by 113 000 barrels per day,” 8/1/12

Special Inspector General for Iraq Reconstruction, “Quarterly Report and Semiannual Report to the United States Congress,” 7/30/12

Su, Sherry, “Iraq to Cut Basrah Crude Exports by 3.8% in Second Half of July,” Bloomberg, 7/16/12


Anonymous said...

in chart you wrote Rev in Mil/ but you also wrote, "hat helped the country earn around $7.5 billion". Is that milion or bilion?

Joel Wing said...

Thanks for pointing that out. It's a typo. It should say billion.