Insurgent Attacks And Clearing Southern Waterway Lead To Drop In Iraq’s Oil Exports

 

After reaching a new post-2003 high in February, Iraq’s oil exports took a drop in March 2014. This is nothing new as Iraq’s petroleum industry often goes through ups and downs because of attacks, bad weather, maintenance work, and other issues. March was a perfect example as insurgents blew up the northern Kirkuk pipeline, and then stayed in the area to prevent crews from repairing it. In the south, the waterway around al-Basra Oil Terminal was temporarily down to remove old wrecks. Together those accounted for March’s decline.

Iraq’s exports saw a 400,000 barrel a day decline from February to March. In February Iraq reached a new high at 2.799 million barrels a day. That was the most for several decades, and highlighted Iraq’s potential. Then in March they went down to 2.396 million barrels a day. The southern pipeline to Basra, which carries the vast majority of the country’s oil flow went from 2.507 million barrels a day in exports to 2.370 million. That was due to removing shipwrecks from the area around al Basra Oil Terminal. Much more important the northern Kirkuk line to Turkey went from an average of 292,000 barrels a day in February to just 25,806 in March. The cause was militants blowing up the line several times in early March, and then attacking repair crews that went to the damaged area. With the Iraqi Security Forces’ commitments in other parts of the country it was not able to provide security for the oil workers or the pipeline, causing the North Oil Company (NOC) to give up its effort to fix the line for now. That is forcing the NOC to cut back production on the northern fields it operates such as Kirkuk, and re-inject some of the oil back into the wells because there is a lack of storage facilities. That can damage the fields, and the longer output is down the longer it can take to ramp them back up. Even when the Kirkuk line returns to operation it will be attacked again as it was blown up nearly once a week in 2013. Finally, this might kill the Oil Ministry’s plans to build a new parallel line to the Kirkuk one, because the area is simply too insecure.

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	$7.47
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	$8
Jun.	2.40	$90.09	$6.453
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	$7.846
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
Jun.	2.32	$97.40	$6.799
Jul.	2.32	$101.00	$7.272
Aug.	2.57	$104.45	$8.356
Sep.	2.07	$104.87	$6.511
Oct.	2.25	$102.57	$7.160
Nov.	2.381	$102.57	$7.324
Dec.	2.341	$102.89	$7.470
2013 Avg.	2.386	$102.33	$7.435
Jan. 14	2.228	$102.37	$7.074
Feb	2.799	$102.05	$8.001
Mar	2.396	$101.03	$7.507

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

June 2.13 mil/bar/day

July 2.32 mil/bar/day

August 2.30 mil/bar/day

September 1.90 mil/bar/day

October 2.06 mil/bar/day

November 2.281 mil/bar/day

December 2.081 mil/bar/day

2013 Avg. 2.16 mil/bar/day

January 2014 2.036 mil/bar/day

February 2.507 mil/bar/day

March 2.370 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

June 193,300 bar/day

July 180,600 bar/day

August 270,900 bar/day

September 250,000 bar/day

October 193,000 bar/day

November 309,00 bar/day

December 260,000 bar/day

2013 Avg. 264,200 bar/day

January 2014 192,000 bar/day

February 292,000 bar/day

March 25,806 bar/day

On the positive side March saw hefty profits. Iraq earned $7.507 billion last month, which was down from February’s $8.001 billion, but above January’s $7.074. That was despite a decline in the price of Iraqi crude from $102.37 per barrel in January to $102.05 in February, and $101.03 in March. So far Iraq is averaging $7.527 billion a month, which is above 2013’s $7.435 billion. The nation needs to bring in as much as it can because its budget is exploding, and is not always well planned threatening the country with deficits. Sometimes it appears that the politicians are drawing the budget based upon Iraq’s potential rather than the realities of its oil industry, which provides over 90% of the government’s funding.

Ebbs and flows are a constant with Iraq’ exports. In October 2012 it achieved 2.62 million barrels a day in exports, which was then the highest post-03 mark achieved. It was able to sustain that rate for only one month before the amounts dropped. It wasn’t able to achieve that mark again until April 2013 before dipping again. That’s the reason why the headlines about February 2014’s new high had to be taken with a grain of salt. Iraq Oil Report has pointed out that the southern single point moorings are increasing their capacity, which should mean more exports from the south in the near future. However the Kirkuk line could be down for weeks more, and there’s no telling how long it will stay on line before it is blown up again by insurgents who could repeat their tactic again and keep repairs from being done. That puts Iraq in a precarious situation as petroleum production is largely regulated by how much the country can export. Without a steady stream to foreign markets output has to be curtailed setting back the Oil Ministry’s grand plans for the future. The Ministry is working on trying to solve these bottlenecks, but the nature of the country is that everything always takes far longer than is planned. That’s the major reason why exports have been at a plateau for the last two years.

SOURCES

Kent, Sarah, and Scheck, Justin, and Bradley, Matt, “Iraq Oil Output Exceeds Hussein Era,” Wall Street Journal, 4/21/14

Lando, Ben, “Despite March exports drop, record output for new buoys,” Iraq Oil Report, 4/11/14

Al-Najaf, Kamaran, Lando, Ben, “Iraq’s March oil exports fall by 400k bpd,” Iraq Oil Report, 4/25/14

Republic Of Iraq Ministry of Oil, “Iraqi Crude Oil Exports – March 2014,” 3/25/14

Another Election Surprise For Iraq?

 

April 30, 2014 Iraqis head to the polls in the general election. Iraq’s last few elections have all provided surprises, and this one looks to be no different. In 2009, Prime Minister Nouri al-Maliki’s new State of Law (SOL) party swept the south and Baghdad in the provincial elections building upon his success against Moqtada al-Sadr’s Mahdi Army in Basra, Maysan, and Baghdad, his military campaign against insurgents in Mosul, and challenging the Kurds over the disputed territories the year before. The Islamic Supreme Council of Iraq (ISCI) was the big loser as the voters punished it for its poor performance after being the big winner in 2005. Then in 2010 it appeared that Maliki would again have a big win, but was surpassed by one seat by the Iraqi National Movement. Maliki had to resort to the courts to get a ruling to allow him to put together a coalition after the voting instead of letting the winner with the most ballots do it. He then played upon the divisions within the INM, and the Kurdish parties’ fear of the INM to obtain a second term. In the 2013 provincial level balloting it was State of Law that lost seats for its lack of good governance. More importantly the Sadrists and Supreme Council formed cross sectarian coalitions to shut SOL out of some new local governments.

Most Iraq watchers now seem to believe that the prime minister will get the most seats in parliament, and then go through a very long process of negotiations that could drag out for up to a year, and ensure himself another four years in office. The premier is hoping that his Shiite base will come out for him out of fear of the growing insurgency, and give him a plurality of votes. He will then be able to play upon the splits within the Sunni parties to ally with Deputy Premier Salah al-Mutlaq. If that gives him momentum the history of Iraqi politics is for the other parties to jump on board to assure themselves positions within the new government.

An alternative scenario could play out however. Last year ISCI was able to cut into Maliki’s base, and are hoping to repeat that again. It has portrayed itself as a nationalist party that has the support of the religious establishment in Najaf. The Sadrists’ Ahrar bloc believes that it can maintain its alliance with the Supreme Council that it forged in the 2013 elections. If they get anything near the number of seats of Maliki it will be a free for all for to create the majority necessary for a new government. The two Shiite religious parties could play upon the mutual hatred of the prime minister felt by other lists such as Speaker Osama Nujafi’s Mutahidun and Kurdish President Massoud Barzani’s Kurdistan Democratic Party (KDP) to counter SOL. In previous years Maliki has been able to play off the differences of his opponents, but this year their opposition to him could be strong enough to actually unite them. This might give the prime minister a 50-50 chance to stay in power. The problem is that it will be months before the actual winners are determined, and in the meantime the status quo will remain. It should also be noted that if the anti-Maliki factions prevail they will not be able to form a majority government that does not include SOL. The courts are under the sway of Maliki and he will likely turn to them to overturn any coalition that does not include him.

A third possibility is that the government formation process becomes so deadlocked that Maliki will give up the premiership, but demand that SOL retain the position. That would require a new candidate within the list to be found. Besides Higher Education Minister Ali al-Adeeb, who is a rival to Maliki, the party lacks other prominent members. Then again, the prime minister was a middling official in Dawa before he assumed the top spot in 2006, so there is a precedent of someone emerging from the wings to assume power. Deputy Premier Hussein Shahristani of the Independents could be another alternative as well.

Last there is the role of outside powers. The Obama administration appears to be trying to re-engage with Iraq due to the rising violence. It will likely try to play a neutral role however, and just ensure that the process is as fair as possible. That’s not true of the other players. Turkey has gone back and forth on Maliki, but is allied with Mutahidun and the KDP. It could push the two to work together over their opposition to the prime minister. Saudi Arabia and the Gulf States are against Maliki as well, but they also oppose Shiite rule overall, which is a dead end given the ethnosectarian quota system that the ruling parties believe in. That will limit their influence. Finally, Iran might play a pivotal role. It may back Maliki to maintain the status quo in Iraq, because it is more concerned about the fighting in Syria right now. Then again, it could be angry with Maliki for playing divide and conquer with the Kurdish and other Shiite parties that have close ties to Tehran, which has led to political instability in Iraq. That could be a game changer if it throws its weight behind the Supreme Council and Sadrists during negotiations for a new government. Given these factors it appears that Iraq’s 2014 elections will have many more uncertainties than givens.