Tuesday, June 11, 2013

Iraq’s Oil Exports Remain Flat-Lined For Last Fourteen Months


April 2013 saw Iraq return to its highest export levels in the last 30 years. Unfortunately, the industry still suffers from a number of major problems, which prevent it from being able to maintain those figures, and reach its lofty goals. Not only that, but the price for Iraqi crude saw a dip for that month, while problems with Kurdistan and insurgents also came up. Those are all reasons why Iraq’s petroleum business has been at a plateau for the last fourteen months. That doesn’t mean production is not growing, and things won’t change, but it will just take a lot longer than the Oil Ministry projects.
(Reuters)
Iraq’s oil exports recovered in April after a four-month decline. In that month, Iraq exported an average of 2.62 million barrels a day. That was up from 2.41 million barrels in March. Total exports in April were 78.7 million compared to 77.64 million the previous month. The increase was due to the southern pipeline through Basra, which went from 2.1 million in exports March to 2.31 million in April. That was one of the highest amounts since the 2003 invasion. That was planned as the Oil Ministry scheduled 13 more cargoes in April, 48 total, then in March. The opposite occurred in the north where the Kirkuk line decreased from 316,100 in March to 306,600 in April. The flow through that pipeline has been down since reaching a high of 451,600 in October 2012, because the Kurdistan Regional Government (KRG) stopped its official exports over a dispute over payments with Baghdad. Instead, the Kurds are now trucking petroleum to Turkey. In April that reached almost 60,000 barrels a day. Not only that, but the first shipment of Kurdish oil was sold on the international market that month. The central government considers those exports illegal, and has constantly threatened legal action to stop them, but nothing has happened. April seemed like an encouraging month for the Oil Ministry. Exports were back to what they were at the end of 2012, which marked the highest levels in 30-years. Unfortunately, that was still below the 2.9 million barrel mark set for the year. Few analysts believe that amount is attainable this year, because Iraq faces so many problems. One is that exports continue to fluctuate up and down. In May for example, they were back down to 2.484 million. The industry is still expanding, but very slowly. For the year, the country is averaging 2.47 million barrels in foreign sales, just slightly more than the 2.41 million it did in 2012.


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
2013 Avg.
2.47
$103.74
$7.713

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
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

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
January 2013 264,500 bar/day
February 339,200 bar/day
March 316,100 bar/day
April 306,600 bar/day

A more troubling issue was the fact that prices for Iraqi crude dropped in April. One barrel sold for an average of $98.70, compared to $103.76 the previous month. That meant Iraq earned $7.764 million for April, down from $7.772 million in March despite the increase in exports. This was the first time prices dropped below $100 per barrel since July 2012. Overall, it was the third time that occurred in the last 26 months. For the year, prices for Iraqi petroleum are down from 2012, and so is the monthly revenue. If that trend continues that could be problematic for Iraq, which relies upon oil for 90% of its revenue.

There are many other problems that the oil industry faces, one of which is that it remains a target. On April 25 for instance, the northern pipeline was bombed in the Shirqat area of Salahaddin province. Insurgents have attacked the line nearly every month this year. Before that the Kurdistan Workers Party (PKK) in Turkey was blowing it up regularly. The Kirkuk line is already operating at below capacity. It also suffers from a lack of maintenance, which often leads to leaks, and other issues. The constant bombings just adds to those already existing difficulties.

More importantly, Iraq suffers from major structural and environmental impediments to the growth of its energy sector. Bad weather in the south constantly stops tankers from docking at its ports. There is a lack of pumping and pipeline capacity, and not enough storage facilities. Government red tape holds up the importation of materials and workers, and there are not enough trained Iraqis. All this means that Iraq’s oil sector cannot grow as fast as the government hopes. The nation has such huge potential, but much of it is going untapped due to these barriers. Those are the major reasons why Iraq continuously misses the goals it sets for itself.

For now, Iraq’s oil industry is holding steady. April’s exports saw a return to the highs of 2012, but that proved unsustainable. A bigger issue was that prices and profits have dropped since last year. Baghdad is working on its bottlenecks slowly but surely. If the value of Iraqi crude plummets however, any increases in production will not only be offset by lower revenue, but could contribute to oversupplying world markets and driving down prices more. Iraq’s planning is notoriously poor, and all the government is currently focusing upon is pumping as much petroleum as possible as quickly as it can. That’s based upon the theory that the demand for energy will continuously increase. That’s not so true today. While developing countries like China are seeing a large increase in the amount of oil that it uses, the West is actually producing more petroleum of is own, and cutting back on demand. Right now this has not become an issue, but Iraq will eventually have to deal with the consequences of its policies.

SOURCES

Ajrash, Kadhim and Razzouk, Nayla, “Iraq Revises Its Oil Reserves to 150 Billion Barrels,” Bloomberg, 4/10/13

Aswat al-Iraq, “Iraqi oil pumping to Turkey stopped by explosion,” 4/25/13

Bloomberg, “Iraq to Increase Basra Oil Shipments in April,” Iraq Business News, 4/2/13

Donati, Jessica and Mackey, Peg, “Iraqi Kurdistan sells first crude, defies Baghdad,” Reuters, 4/5/13

Al Jazeera, “Gunmen attack Iraq gas field,” 4/2/13

Mohammed, Aref, “Protests heat up near Iraq’s West Qurna-2 oilfield,” Reuters, 4/16/13

Press TV, “Iraq threatens to take legal actions against Turkey over KRG oil deals,” 4/5/13

Al-Rafidayn, “Iraqi Kurdistan has doubled its oil exports and ignore Baghdad,” 4/24/13

Republic of Iraq Ministry of Oil, “The Iraqi Ministry of Oil Declares its Export for April 2013,” 5/23/13

Reuters, “Bottlenecks put brakes on Iraq’s oil export growth,” 4/12/13
- “Iraq cements position as second-biggest Opec oil exporter,” 4/30/13
- “Iraq May oil exports fall to 2.484 m bpd,” 6/4/13

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