Tuesday, June 25, 2013

Iraq’s Oil Exports At 15-Month Plateau, While Prices Drop


Iraq’s oil exports made a large jump from 2011 to 2012, but have since flat-lined. For the last fifteen months they have stayed at relatively the same level. The country was still profiting due to high oil prices. In the last two months that has changed however, as the price per barrel of Iraqi crude has fallen below $100. This poses a dilemma for the country as its entire development plan is based upon boosting its exports as quickly as possible, but it currently lacks the infrastructure to achieve that, and now the world oil market is changing.

In May 2013, Iraq’s petroleum exports dropped. In total, it exported 76.9 million barrels for that month, down from 78.7 million in April. That averaged out to 2.48 million barrels a day in May compared to 2.62 million in April. The southern pipeline to Basra went from 2.31 million barrels in April to 2.19 million in May. That was roughly the same level as February and March. The northern Kirkuk line averaged 283,800 barrels a day, a decrease from 306,600 in April, marking a three-month decline. For the year, the southern pipeline’s export numbers have been up in 2013 at an average of 2.177 million barrels, compared to 2.042 million in 2012. The Kirkuk line however has seen lower output from 373,300 barrels last year to 302,000 barrels this year. Oil Minister Abdul Karim Luaibi has blamed attacks upon the northern line for the overall decrease in exports. Last month, the line was bombed twice for instance. One attack at the beginning of the month shut it down for nearly a week. For months, insurgents have been targeting the line as it passes through territory they control, and it is an easy way to punish the government. Before that, the Kurdistan Workers Party (PKK) was blowing it up on the Turkish side. The government has responded by increasing patrols along the Kirkuk line to prevent sabotage. More importantly, because of disputes with the central government, Kurdistan is no longer exporting through the north. There was also maintenance in Basra that helped account for the lower exports in the south in May. All together that means Iraq is far from reaching its 2.9 million target set in the 2013 budget. That might have been unrealistic to begin with though.

Iraq Oil Exports And Profits 2011-2013
Month
Avg.
Exports
(Mil/
Bar/
Day)
Avg. Price Per Barrel
Revenue (Bill)
Jan. 11
2.16
$90.78
$6.082
Feb.
2.20
$98.44
$6.064
Mar.
2.15
$107.13
$7.167
Apr.
2.14
$114.26
$7.342
May
2.22
$108
$7.45
Jun.
2.27
$105.17
$7.173
Jul.
2.16
$108.79
$7.311
Aug.
2.18
$104.91
$7.124
Sep.
2.10
$104.89
$6.619
Oct.
2.08
$104.04
$6.742
Nov.
2.13
$106.59
$6.833
Dec.
2.14
$106.18
$7.061
2011 Avg.
2.16
$105.00
$6.913
Jan. 12
2.10
$109.08
$7.123
Feb.
2.01
$112.92
$6.595
Mar.
2.31
$117.99
$8.472
Apr.
2.50
$116.79
$8.795
May
2.45
$103.03
$7.831
Jun.
2.40
$90.09
$6.487
Jul.
2.51
$97.14
$7.577
Aug.
2.56
$106.22
$8.445
Sep.
2.59
$107.59
$8.371
Oct.
2.62
$105.51
$8.578
Nov.
2.62
$104.32
$8.200
Dec.
2.34
$103.72
$7.551
2012
Avg.
2.41
$106.20
$7.835
Jan. 13
2.35
$104.92
$7.672
Feb.
2.53
$107.66
$7.644
Mar.
2.41
$103.76
$7.772
Apr.
2.62
$98.70
$7.764
May
2.48
$97.23
$7.477
2013 Avg.
2.47
$102.45
$7.665

Oil Exports Through Basra 2012-2013
January 2012 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
August 2.252 mil/bar/day
September 2.178 mil/bar/day
October 2.172 mil/bar/day
November 2.122 mil/bar/day
December 2.022 mil/bar/day
2012 Avg. 2.042 mil/bar/day
January 2013 2.093 mil/bar/day
February 2.196 mil/bar/day
March 2.1 mil/bar/day
April 2.31 mil/bar/day
May 2.19 mil/bar/day
2013 Avg. 2.177 mil/bar/day

Oil Exports Through Kirkuk 2012-2013
January 2012 393,500 bar/day
February 375,800 bar/day
March 400,000 bar/day
April 393,300 bar/day
May 364,500 bar/day
June 316,600 bar/day
July 300,000 bar/day
August 312,900 bar/day
September 420,000 bar/day
October 451,600 bar/day
November 426,600 bar/day
December 325,800 bar/day
2012 Avg. 373,300 bar/day
January 2013 264,500 bar/day
February 339,200 bar/day
March 316,100 bar/day
April 306,600 bar/day
May 283,800 bar/day
2013 Avg. 302,000 bar/day

An additional problem facing Iraq is that prices for its petroleum are declining. In May, a barrel of Iraqi crude went down from $98.71 to $97.23. That meant in May it earned $7.477 billion compared to $7.764 billion in April. That was the fourth lowest price since January 2011, and the lowest monthly revenue since June 2012. Both prices and monthly profits have gone down this year compared to 2012. The drop was due to changes in the international market. In May, OPEC had its highest production in seven-months, while the United States also upped its output as well, and has been improving its conservation. That resulted in declining oil prices. If both trends continue the era of $100 prices could be over, which has lasted all but six months since January 2011 for Iraq. Iraq is the second most oil dependent country in the world, so it relies upon high prices to keep its economy afloat. Revenues are still high, but this could be a troubling trend in the future.

The Kurdistan Regional Government (KRG) has been carrying out its own independent oil policy as well. It is working to convert a natural gas pipeline to ship oil to Turkey, which is supposed to be finished by the end of the year or early 2014. It will have a capacity of 300,000 barrels a day, and connect to the existing Kirkuk line. There are plans for a second, completely independent line to Turkey as well. After its dispute with Baghdad over payments to international companies producing oil in the region, the KRG started trucking oil to Turkey openly in January 2013. By May, the Kurds were shipping around 40,000 barrels a day, and was supposed to reach 60,000 by the end of June. This oil is not only being sold locally in Turkey, but also to other foreign markets. In turn, Turkey is looking towards Kurdistan as being a major energy supplier and business opportunity. Last month, a Turkish state-run oil company announced that it was entering into a joint venture with Exxon to explore oil in the region. Baghdad considers all of this illegal, and has threatened to sue companies exporting oil and sent letters to businesses not to buy Kurdish oil on international markets, but to no avail. The central government still has other cards to play such as the national budget, which makes up 90% of the Kurdistan budget, but for now the argument is mostly a war of words as each side goes its own way.

Despite its lofty goals, Iraq currently lacks the infrastructure to dramatically improve its oil exports. Bad weather, attacks upon the northern pipeline, and the differences between Baghdad and Irbil all add to the current problems. More importantly, the oil market may be changing towards increased output, which will drive down prices. For now Iraq is still bringing in huge amounts of cash, but its long term policy of boosting production as quickly as possible might come at a bad time. Until then the country’s exports will remain at the current plateau for the foreseeable future.

SOURCES

Agence France Presse, “Iraq Oil Exports”
- “Iraq oil exports dip on weather, sabotage,” 6/23/13

Ahmed, Hevidar, “Kurdistan Region Announces Plans for Second Oil Pipeline to Turkey,” Rudaw, 5/21/13

Black, Ian, “Golden oil of Iraqi Kurdistan raises tensions with Baghdad,” Guardian, 6/10/13

Neuhof, Florian, “BP, Chevron, Total and other major oil firms seek new terms in Iraq,” The National, 5/23/13

Payne, Julia and Mackey, Peg, “Kurdish crude sales to rise as exports reach second Turkish port,” Reuters, 5/22/13

Press TV, “Attack on Iraq-Turkey oil pipeline halts flow,” 5/14/13

Ministry of Oil, “Iraq Crude Oil Exports – May 2013,” Republic of Iraq, 6/23/13

Nguyen, Lananh, “OPEC Boosts Oil Production to Seven-Month High in May, IEA Says,” Bloomberg, 6/12/13

Reuters, “Iraq, Eni set lower output target at Zubair oilfield,” 5/30/13
- “Iraq oil exports at 2.6m bpd average in May,” 5/26/13
- “Iraq vows to halt oil sales from KRG to Turkey,” 5/25/13
- “Iraq’s oil exports fall 200,000 bpd so far in June,” 6/21/13

Zhu, Wenqian, “U.S. oil boom helps thwart OPEC,” CNN Money, 6/19/13

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