September 13, 2022

WWW.ENERGYINTEL.COM

Iraq Falls Further Behind its Production Targets

  • A rise in Basrah crude exports in August was offset by declines in the north, especially of Kirkuk.
  • Iraq’s oil ministry claims it reached its August target, with crude stocks surging and refinery runs at historic highs.
  • Robust flows to Europe of Basrah crude were displaced in Asia, but Kurdish barrels struggle to find buyers after Baghdad issued legal threats.

Iraq managed to raise crude oil production in August to 4.48 million barrels per day, according to preliminary Energy Intelligence estimates, up by around 70,000 b/d versus July.

That is the highest level by Opec’s second-largest producer since March 2020. But in the past two months the country has also fallen 170,000 b/d short of its Opec targets, with export constraints continuing to hold back its upstream potential.

Surprise Numbers

The oil ministry says August production exactly matched Iraq's Opec-plus target of 4.651 million b/d, rising by 70,000 b/d versus July, despite federal crude exports edging lower during this period.

Energy Intelligence sees shipments from Basrah up by 43,000 b/d, but exports from the north down by around 50,000 b/d. The latter includes a 40,000 b/d slump in Kirkuk loadings, which Iraqi officials say is related to pipeline maintenance and rising demand at two local refineries — and not the escalating oil row between Baghdad and Erbil.

The ministry claimed, as evidence of its production increase, that Iraq’s crude stocks rose by 168,000 b/d — more than half of this filling storage tanks in Basrah — and that domestic refinery runs also rose by 103,000 b/d to 805,000 b/d.

Such claims are difficult to verify or refute. However, an informed Iraqi source told Energy Intelligence that crude stocks at the main storage facilities in Basrah, which he says can now hold up to 9 million bbls, actually fell in August by 14,000 b/d, citing confidential data from state oil marketer Somo.

The official ministry figures for domestic consumption are also surprising. Previously Iraq’s monthly refinery intake never exceeded 683,000 b/d, according to Jodi data going back 15 years.

Also, a Somo source confirmed that the new 140,000 b/d Karbala refinery was not expected to start up until end-September at earliest.

Iraq may have inflated its production numbers to protect the baseline, according to which its Opec-plus quota is calculated. It was revised up last year to 4.8 million b/d, thus allowing Iraq to raise output in the future, especially if it manages to expand export capacity.
Iraq's August 2022 Production
('000 b/d)Vol.
Basrah Exports3,274
Domestic Refining691
Direct Crude Burn35
Less Spiked Condensate, Fuel Oil-40
KRG Output365
Smuggling30
Exported from Kirkuk via Turkey†36
Exported from Kirkuk to Jordan*0
Stockbuild79
Total4,480

Rising Flows to Europe

The reconfiguration of global trade flows is visibly affecting Basrah crude exports as cheap Russian oil continues flowing to Asia — to India and China in particular, the top two buyers of Iraqi crude.

Somo chief Alaa al-Yasiri insisted last week that none of Iraq’s customers had asked to cancel their contracts. “On the contrary, there is a request to increase quantities in Asia," he told Iraqi state media.

But he admitted that Iraq is competing against Russia for sales to Asia, and Energy Intelligence data show that there has been a conspicuous fall in the amount of Basrah crude shipped to India, particularly over the past six months while shipments to Europe grew.

Basrah flows to India — the top destination for Iraqi crude over the past 18 months — were down by some 400,000 b/d in August versus March, with the Asian country also taking large volumes of Russian Urals and Espo shipped from the Kozmino terminal in Russia’s Far East.

At least some of the displaced Basrah crude is now being directed to Europe. More than 600,000 b/d headed there over the past three months compared with around 450,000 b/d in January-March.

European buyers would have been encouraged by Somo’s official formula prices, or OSPs, for Basrah crude loading in June, July, August and September, which were cut compared with rival Saudi grades. Somo could see less European demand for October-loading Basrah crude, however, after raising its OSPs for cargoes to Europe by more than $1/bbl compared with the equivalent OSPs set by Saudi Aramco.

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 '22Apr '22May '22Jun '22Jul '22Aug '2201,0002,0003,0004,000Energy Intelligence
Kurdish Conundrum

But far greater uncertainty hangs over the future of Kurdish crude exports to Europe due to the escalating and bitterly contested efforts by Iraq’s oil ministry to roll back the control of the Kurdistan Regional Government (KRG) over the region's oil resources.

Exports were only fractionally down in August at 373,000 b/d and should even get a minor boost this month from the commissioning of a new 25,000 b/d production facility at the 30,000 b/d Sarsang Block, operated by US form HKN.

But in a letter signed by al-Yasiri and sent to buyers and sellers of Kurdish crude, Somo warned last month that it would take firm legal action “in order to block loadings of … unlawful cargoes” originating in Kurdistan.

Buyers of the medium sour grade, also known as KBT, include Greece's Motor Oil and Hellenic Petroleum, Italy's API, and Israel's Paz Group, while trading companies that sell it on behalf of the KRG include Vitol and Petraco.

A European crude trader who had received Somo’s letter said that some sellers were struggling to place cargoes of Kurdish crude in Europe, citing what he called “the sword of Somo.” Vitol was even heard to have sold 2 million bbls of KBT in Asia, he noted, though this could not be confirmed.

Iraqi Mideast Gulf Loadings, August 2022
DateVol. ('000 bbl)VesselQualityLoading PointDestinationLifter
Aug 11930XIN AN YANGBMBerth 3ChinaRongsheng
Aug 1704DESH SAMMANBMBerth 1IndiaHPCL
Aug 11956BALTIC LOYALTYBHSPM 5Europe
Aug 2628OAKABMBerth 3IndiaMRPL
Aug 2974KASOSBMSPM 1Netherlands
Aug 2705DESH SAMMANBMBerth 1IndiaHPCL
Aug 3971DELTA COMMANDERBMSPM 1GreeceHellenic
Aug 3960NOVOBMBerth 2China
Aug 31920SEAWAYS KILIMANJAROBMBerth 4NetherlandsMercuria
Aug 4960PRINCESS VANYABMBerth 1TaiwanFPCC
Aug 41918YIOBHSPM 3IndiaReliance
Aug 4957SKOPELOSBHSPM 5IndiaIOC
Aug 51039XIN YONG YANGBMBerth 3ChinaUnipec
Aug 6992SEAWAYS PECOSBHSPM 5USValero
Aug 61959NEW HORIZONBMSPM 1ChinaShell>Sinopec
Aug 71961SEAWAYS MCKINLEYBMBerth 4ChinaSinochem
Aug 71038DELTA SUPREMEBHSPM 2TurkeyTupras
Aug 7960SUEZ HANSBMBerth 1ItalyEni
Aug 7961YUFUSANBHSPM 2IndiaReliance
Aug 7962YUFUSANBMSPM 2IndiaReliance
Aug 8964NEW VOYAGEBMBerth 3FranceExxon Mobil
Aug 91965NEW VANGUARDBMSPM 1ChinaHengli
Aug 91961C.PASSIONBHSPM 5South KoreaGS Caltex
Aug 10968FRONT DRIVABMBerth 4ChinaRongsheng
Aug 101043TWIN POLLUXBHSPM 5IndiaNayara Energy
Aug 101920DICKENSBMBerth 2USValero
Aug 10523GIANNISBMSPM 2ItalySaras
Aug 10485GIANNISBHSPM 2ItalySaras
Aug 11965EPHESOSBMBerth 1TurkeyTupras
Aug 11979V.PROSPERITYBHSPM 3South KoreaGS Caltex
Aug 121974NEW CAESARBHSPM 5SpainRepsol
Aug 12717GAMSUNOROBMBerth 2IndiaONGC
Aug 12986PATMOS IBMBerth 3IndiaIOC
Aug 121949COSGRAND LAKEBMSPM 1ChinaUnipec
Aug 14965KRITI VIGORBMBerth 1GreeceMotor Oil
Aug 14992NISSOS SIKINOSBMBerth 4TurkeyTupras
Aug 151048DESH VISHALBHSPM 5IndiaNayara Energy
Aug 15960NEW GIANTBMBerth 3IndiaBPCL
Aug 151913OMEGA TRADERBH SPM 3IndiaReliance
Aug 151932FRONT DYNAMICBMSPM 2ChinaUnipec
Aug 161821SEA LEOPARDBMBerth 2ChinaUnipec
Aug 161813MARBATBMSPM 1ChinaUnipec
Aug 17974DESH VIRAATBHSPM 3IndiaIOC
Aug 171009DESH VIRAATBMSPM 3IndiaIOC
Aug 171001XIN LONG YANGBHSPM 2ChinaUnipec
Aug 17960V.PROSPERITYBMBerth 4South KoreaGS Caltex
Aug 181959ATLANTIC PIONEERBHSPM 5IndiaReliance
Aug 18960SINGAPORE VOYAGERBMBerth 1USChevron
Aug 18960UNIVERSAL VICTORBHSPM 2South KoreaGS Caltex
Aug 19996ATLANTASBHSPM 3EuropeShell
Aug 19952ATLANTASBMSPM 3EgyptEGPC
Aug 191971NEW LAURELBMSPM 1ChinaUnipec
Aug 191953FRONT EMPIREBMBerth 3ChinaSinochem
Aug 21960NEW ODYSSEYBMBerth 4USMarathon
Aug 21954ALEXANDER THE GREATBMBerth 2SingaporeShell
Aug 221834ATHENIAN GLORYBMSPM 1ChinaUnipec
Aug 22965SOUNIONBMBerth 1GreeceMotor Oil
Aug 231921DHT LOTUSBMBerth 3JapanIdemitsu
Aug 231938PSARA IBHSPM 2IndiaNayara Energy
Aug 23961YIOBHSPM 5IndiaReliance
Aug 24979MARAN HELIOSBMBerth 2SpainRepsol
Aug 241009IVONNEBHSPM 3IndiaHPCL
Aug 24969IVONNEBMSPM 3IndiaHPCL
Aug 251929XIN JIN YANGBMSPM 1ChinaZhenhua
Aug 25960HOUSTON VOYAGERBMBerth 4USChevron
Aug 26955BRIGHT PIONEERBHSPM 5IndiaIOC
Aug 26958BRIGHT PIONEERBMSPM 5IndiaIOC
Aug 261958C. ETERNITYBHSPM 3South KoreaSK Energy
Aug 26991DELTA EURYDICEBMBerth 3GreeceMotor Oil
Aug 26992CENTURYBMBerth 1IndiaIOC
Aug 27996ITHAKI WARRIORBHSPM 2TurkeyBP
Aug 29941DHT CHINABHSPM 2South KoreaHyundai
Aug 291825ECO LEADERBMSPM 1ChinaUnipec
Aug 291818BOSTONBMBerth 4ChinaUnipec
Aug 301908BALTIC SUNRISEBHSPM 5Europe
Aug 30982MARAN LEOBHSPM 3FranceExxon Mobil
Aug 30971MARAN LEOBMSPM 3FranceExxon Mobil
Aug 301920NEW VITALITYBMBerth 2ChinaRongsheng
Aug 311904KASAGISANBMBerth 3IndiaIOC
Total ('000 bbl)101,491----------
Total ('000 b/d)3,274--BM 2152 BH 1121------
Iraqi Loadings Ex-Ceyhan, August 2022
DateVol. ('000 bbl)VesselQuality Loading PointDestinationLifter
Aug 5600SAINT GEORGE Kurdish crudeCeyhanGreeceMotor Oil
Aug 5600MINERVA SOPHIAKurdish crudeCeyhanGreeceMotor Oil
Aug 8600VALFOGLIAKurdish crudeCeyhanRomaniaPetraco
Aug 11600MINERVA ROXANNEKurdish crudeCeyhanGreeceHellenic Petroleum
Aug 13240PipelineKirkukCeyhanTurkeyTupras
Aug 15600SYROS WARRIORKurdish crudeCeyhanIsrael
Aug 151000VALTAMEDKurdish crudeCeyhanItalyAPI
Aug 171000BORDEIRA Kurdish crudeCeyhanItalyTeseco
Aug 18240PipelineKirkukCeyhanTurkeyTupras
Aug 19239PipelineKirkukCeyhanTurkeyTupras
Aug 21600NEVERLANDKurdish crudeCeyhanItalyVitol>API
Aug 23243PipelineKirkukCeyhanTurkeyTupras
Aug 241000MINERVA DOXAKurdish crudeCeyhanIsrael
Aug 25600MARIANNA V.V Kurdish crudeCeyhanItalyAPI
Aug 261000LIPARIKurdish crudeCeyhanGreeceHellenic Petroleum
Aug 271000BORDEIRAKurdish crudeCeyhanItaly
Aug 27600VALFOGLIAKurdish crudeCeyhanGreecePetraco>Motor Oil
Aug 301000OTTOMAN COURTESYKurdish crudeCeyhan
Aug 31800VALTAMEDKurdish crudeCeyhanIsraelPaz
Aug 31147PipelineKirkukCeyhanTurkeyTupras
Total ('000 bbl)12,709----------
Total ('000 b/d)410of which 36 Kirkuk--------

Simon Martelli, London