April 29, 2022

WWW.ENERGYINTEL.COM

Iraq’s March Output Pinched by Export Constraints

  • Iraq’s dilapidated export infrastructure is holding back Opec’s second-largest producer amid growing concerns about the organization's ability to cool prices.
  • Basrah exports to India have surged even as exports to China and Europe dip, but flows could soon change as European refiners seek Urals alternatives.
  • "Free destination" cargoes are currently limited to just 7 million-10 million barrels per month, but Somo expects to offer more crude via spot tenders.

Iraq fell further below its Opec-plus production quota in March despite growing demand in Europe for alternatives to medium, sour Russian Urals. Nevertheless, thanks to spiraling prices, Opec's second-largest producer still managed to generate oil revenues of $10.9 billion — a five-decade high.

Total crude output in March was largely unchanged at 4.257 million barrels per day, according to Energy Intelligence estimates, or 113,000 b/d below its Opec-plus target.

Export constraints meant shipments of Basrah crude were slightly down on the month and 110,000 b/d less than planned. Somo’s loading program for March targeted 3.35 million b/d of Basrah exports, according to a senior official at the state oil marketer. Instead, Energy Intelligence estimates that it loaded just 3.24 million b/d, and perhaps even less according to oil ministry figures.

“I think the maximum capacity for our [Basrah export] system is 3.3 million b/d ... When we work at this level, any shortage, any stoppage, we cannot compensate this quantity the next day,” the Somo official told Energy Intelligence.

“The decline in exports is directly [related] to … the production side. So, we didn’t reach the [Opec production] quota because we don’t have sufficient storage capacity in Basrah.”

Iraq's March 2022 Production
('000 b/d)Vol.
Basrah exports3,240
Domestic refining518
Direct crude burn10
Less spiked condensate, fuel oil-45
KRG output404
Smuggling65
Exported from Kirkuk via Turkey†51
Exported from Kirkuk to Jordan*0
Stockbuild14
Total4,257

Reconfiguring Trade Flows

Iraq has become by far the largest supplier of oil to India, exporting a whopping 1.27 million b/d in March, its highest in years, according to Energy Intelligence tracking. Shipments to China fell slightly to around 900,000 b/d.

However, among major oil-consuming nations, India, attracted by deep price discounts, has stepped up its purchases of rival Russian crude since the invasion of Ukraine. And although data for April has yet to emerge, this may adversely impact Basrah sales to India.

However, the trend would likely be offset by rising Basrah supplies to Europe as buyers there shun Urals. “I think the whole trading map will change,” the Somo official said.

It remains too early to see a big shift in Basrah trade flows. Exports to Europe actually fell in March, and a rare Somo cargo offered in the Platts windows last week, for 2 million barrels of Basrah Medium loading May 25-27, failed to sell, according to Reuters. That appears to highlight the importance of Somo setting a competitive official formula price.

But traders and Iraqi officials say the picture is set to change, if it hasn't already. “I would expect good Basrah demand for June,” said a crude trader in southern Europe.

Iraq seeks to restrict where its buyers take their crude, and the Somo official explained that only a relatively small number of Basrah cargoes are currently “free destination,” meaning in the hands of equity producers who can sell them in Europe on a spot basis.

Currently, those volumes amount to some 7 million-10 million bbl/month — out of around 100 million bbl in total. Under Iraq’s upstream licenses, the equity producers get paid in crude, and the higher the price, the fewer equity barrels they receive.

This also means Somo should have more Basrah cargoes available to sell to Europe via spot tenders in the months ahead, according to the official.

Created with Highcharts 9.0.0(million bbl)DESTINATIONS BY COUNTRY/REGION FOR TOTAL IRAQI CRUDE LOADINGSChinaIndiaEuropeSouth KoreaTurkeyUnited StatesOtherSep'20Oct'20Nov'20Dec'20Jan'21Feb'21Mar'21Apr'21May'21Jun'21Jul'21Aug'21Sep'21Oct'21Nov'21Dec'21Jan'22Feb'22Mar'2201,0002,0003,0004,000Source: Energy IntelligenceDec'20 Europe: 584

Beleaguered Pipeline Plans

Efforts to revamp Iraq’s creaky export infrastructure have made woefully slow progress over the past few years. Ahmed Fadhil, the deputy director of planning and budget at the state-run Basrah Oil Co. (BOC), was quoted by state media this month saying the contract to complete the Sealine 3 pipeline was currently being finalized “and may become operational at the end of 2023.”

When it does, it is expected to reactivate the offshore Khor al-Amaya terminal that has been out of action for four years. The project could add at least 500,000 b/d to southern Iraq’s oil export capacity.

In an illustration of the poor state of the Basrah export system, Somo this month planned to start exporting Barsah Heavy, which usually loads from the single point moorings (SPMs), via the berths at the Basrah Oil Terminal. This would help load more Basrah Medium, its main export grade, via the SPMs.

However, in a letter to its customers dated Apr. 5 and seen by Energy Intelligence, the company informed that Basrah Heavy would continue to load via the SPMs. “Unfortunately, the Basrah Oil Co. was not ready to complete this change … and we returned to the same procedure as before,” the Somo official explained.

Upstream Potential

There is little doubt that Iraq has the upstream capacity to hike exports with the right infrastructure in place, especially as field development activity appears to be picking up.

Malaysia’s Petronas said on Apr. 17 that it had recently brought a new facility on stream that had raised production at its Garraf field to 130,000 b/d. The company said it planned to further increase the field’s production to another level by third-quarter 2022, paving the way for it to reach its plateau production target of 230,000 b/d in 2024.

Separately, the state-run Iraq Drilling Co. announced this week that it had started drilling the first of 20 planned wells at the Nasiriyah field, in a project with Weatherford that it expects to be completed within 18 months.

Iraqi Mideast Gulf Loadings, March 2022
DateVol. ('000 bbl)VesselQualityLoading PointDestinationLifter
Mar 11,929SAKEBMSPM 2IndiaIOC
Mar 1960CAPTAIN LYRISTISBMBerth 2GreeceHellenic Petroleum
Mar 2956MARAN ARIADNEBHSPM 5ChinaAl-Waha
Mar 21,052MARAN HELIOSBMSPM 3IndiaHPCL
Mar 2973PATMOS IBHSPM 1IndiaReliance
Mar 2981EURODIGNITYBMBerth 1IndiaIOC
Mar 2973BOUBOULINABHSPM 5SpainRepsol
Mar 31,965COSPEARL LAKEBHSPM 1ChinaZhenhua
Mar 31,005MARATHIBM Berth 2IndiaIOC
Mar 31,042ANDRONIKOSBMBerth 3SingaporeShell
Mar 51,972NEW LAURELBMSPM 2ChinaSinochem
Mar 6987GIANNISBMBerth 1IndiaHPCL
Mar 61,001LORD BYRON 21BMBerth 4TurkeySocar
Mar 7965UNIVERSAL CREATORBMBerth 1South KoreaGS Caltex
Mar 71,931ALTAIR TRADERBHSPM 1IndiaReliance
Mar 71,035SEA VIOLETBMBerth 2TurkeySocar
Mar 71,019COSFLOURISH LIKEBMBerth 3USMarathon
Mar 81,927BOSTONBHSPM 5IndiaNayara Energy
Mar 81,040MIAOULIS 21BMBerth 3GreeceMotor Oil
Mar 81,919C.INNOVATORBMSPM 3ChinaUnipec
Mar 91,959ASIA DAWNBMBerth 4ChinaCNOOC
Mar 91,962DIJLAHBMSPM 2ChinaSinochem
Mar 91,003TILOS IBMBerth 3IndiaReliance
Mar 101,963EAGLE VERSAILLESBHSPM 1South KoreaGS Caltex
Mar 10991DELTA COMMANDERBMBerth 1TurkeyTupras
Mar 10983AEGEAN UNITYBHSPM 1South KoreaHyundai Oil
Mar 11979NISSOS SIKINOSBMBerth 2TurkeyTupras
Mar 121,005MOUNT FUJIBHSPM 5IndiaMRPL
Mar 121,941IZKIBMSPM 3ChinaUnipec
Mar 131,051NORDIC PASSATBM Berth 2IndiaBPCL
Mar 142,015DIABMBerth 1ChinaSinochem
Mar 14963CELESTE NOVABHSPM 2IndiaHPCL
Mar 14965CELESTE NOVABMSPM 2IndiaHPCL
Mar 14961ANDROMEDABMSPM 3USChevron
Mar 15943AMAZONBMBerth 3IndiaIOC
Mar 15969CONCORDBHSPM 5IndiaIOC
Mar 17989DEMETRIOSBMBerth 1IndiaNayara Energy
Mar 17991MIAOULIS 21BHSPM 5GreeceMotor Oil
Mar 171,954NEW ENERGYBMSPM 3USBP
Mar 171,943DALIANBHSPM 2IndiaReliance
Mar 171,930COSJADE LAKEBM Berth 4ChinaZhenhua
Mar 171,904DELTA APOLLONIABMSPM 1ChinaUnipec
Mar 18961ZEYNEPBHSPM 1USValero
Mar 19994AEGEAN DREAMBMSPM 2ChinaMotor Oil
Mar 19976CENTURYBM Berth 3IndiaIOC
Mar 201,001EUROLEADERBMBerth 4IndiaMRPL
Mar 20911DESH SHAKTIBMBerth 1IndiaIOC
Mar 201,944AZURE NOVABHSPM 5IndiaReliance
Mar 211,044ORPHEASBMBerth 4GreeceMotor Oil
Mar 211,044FRONT SAVANNAHBMBerth 3TurkeyTupras
Mar 221,952SHIZUKISANBMSPM 2EgyptEGPC
Mar 221,921C.CHAMPIONBHSPM 1South KoreaSK Energy
Mar 22961SAKEBHSPM 3IndiaIOC
Mar 22959SAKEBMSPM 3IndiaIOC
Mar 23451DOLVIKENBHSPM 3TurkeyLukoil
Mar 23422DOLVIKENBMSPM 3ItalyLukoil
Mar 23975NORDIC THUNDERBMSPM 5Italy
Mar 231,870HATTERASBMBerth 1ChinaUnipec
Mar 24986PATMOS IBHSPM 1IndiaReliance
Mar 241,923NEW ASSURANCEBMBerth 3Europe
Mar 251,961KASSOS IBMSPM 2IndiaIOC
Mar 25989DELTA KANARISBHSPM 1SpainRepsol
Mar 26995DELTA EURYDICEBMBerth 2GreeceMotor Oil
Mar 26949BALTIC GLORYBMBerth 3ChinaPetroChina
Mar 27967POLYMNIA IBHSPM 5IndiaNayara Energy
Mar 28994NICOLAOSBMBerth 1ChinaUnipec
Mar 28972MARAN ARTEMISBMSPM 2USChevron
Mar 281,023DESH SHOBHABMBerth 4IndiaHPCL
Mar 29991CLASSICBMBerth 3IndiaBPCL
Mar 29994MORVIKENBMSPM 5IndiaHPCL
Mar 291,920SEAWAYS TYBEEBMBerth 1ChinaSinochem
Mar 29979AMORGOSBHSPM 3IndiaIOC
Mar 29973AMORGOSBMSPM 3IndiaIOC
Mar 29973TILOS IBHSPM 1IndiaReliance
Mar 301,983C.PROGRESSBMSPM 2ChinaUnipec
Mar 30988TONYBHSPM 5IndiaBPCL
Mar 30987NAVE CONSTELLATIONBMSPM 1NetherlandsVitol
Mar 30999MARE SICULUMBMBerth 4Italy
Mar 31956NEW VANGUARDBHSPM 5ChinaZhenhua
Mar 31998EUROVOYAGERBMSPM 2IndiaIOC
Mar 31567KYTHIRA WARRIORBMBerth 2BulgariaLitasco
Total ('000 bbl)100,449
Total ('000 b/d)3,240 BM: 2,252 BH 988
Iraqi Oil Exports
(million b/d)TotalBasrahSomo CeyhanKRG Ceyhan PipelineKRG Trucked to Turkey
Avg. 20122.4222.0490.3700.0000.003
Avg. 20132.4202.1270.2640.0000.029
Avg. 20142.6422.4580.0620.0860.036
Avg. 2015 3.4042.8440.1590.3630.038
Avg. 20163.8043.2900.0210.4920.003
Avg. 20173.8193.3030.0160.4700.029
Avg. 20183.8593.4820.0110.3490.017
Avg. 20193.9643.3990.0920.4230.030
Avg. 20203.4132.8910.0760.4060.033
Avg. 20213.4292.9490.0910.3590.030
Q2'203.4833.0140.0860.3500.030
Q3'203.1132.5470.0790.4570.030
Q4'203.2102.6960.0870.3940.030
Q1'213.342.8410.0950.3720.030
Q2'213.322.8390.0930.3550.030
Q3'213.442.9580.0950.3530.030
Q4'213.633.1590.0800.3540.030
Q1'223.6973.2170.0620.3890.030
Mar '213.2702.8260.0850.3290.030
Apr '213.2672.8200.0780.3390.030
May '213.3882.8720.0990.3870.030
Jun '213.2972.8240.1030.3400.030
Jul '213.3712.8740.0990.3680.030
Aug '213.4432.9950.0890.3290.030
Sep '213.4923.0040.0970.3610.030
Oct '213.4783.0200.0890.3290.030
Nov '213.7313.2760.0650.3600.030
Dec '213.6793.1890.0870.3730.030
Jan'223.6053.1290.0820.3640.030
Feb'223.7973.2810.0520.4340.030
Mar'223.6893.2400.0510.3680.030

Simon Martelli, London