November 29, 2022

WWW.ENERGYINTEL.COM

Iraq Narrows Supply Shortfall, Eyes European Demand

  • Growing volumes of Basrah crude displaced in India by Russian barrels are heading to Europe.
  • Iraq’s new government is pushing for a bigger Opec-plus production quota, even as October output fell far short of target.
  • Infrastructure limitations have capped Basrah exports at 3.3 million b/d, but this could rise next year by up to 250,000 b/d.

Iraq’s oil output in October hit a 2½-year high of around 4.5 million barrels per day, according to Energy Intelligence's estimates, but this was still 150,000 b/d short of its Opec-plus crude production target as export bottlenecks continue to frustrate plans.

Basrah exports were just shy of 3.3 million b/d in October, while Kurdish and Kirkuk exports from northern Iraq via Turkey reached 407,000 b/d and 78,000 b/d, respectively, according to estimates based on shipping reports and loading data.

Meanwhile, Iraq's Opec-mandated production target for November and December has been slashed by a whopping 220,000 b/d to 4.43 million b/d, a level that Baghdad should easily achieve.

In what appeared to be an implicit recognition that Iraq did not approach its October target, a former oil minister said the November and December cuts would not affect exports but instead be accounted for by lower domestic consumption.

Oil Diplomacy

Iraqi Prime Minister Mohammed Shia al-Sudani succeeded in forming a new government last month and has since said he wants the country’s production quota revised. For years Iraq has chafed at its production targets, arguing that the damage caused by decades of sanctions and war justify an exemption.

But while its potential is huge, limits imposed by an aging export infrastructure have repeatedly prevented Baghdad from hitting its Opec-plus targets.

The new oil minister, Hayan Abd al-Ghani, who traveled to Riyadh last week and met his Saudi counterpart, has made clear that it is his priority to raise Iraq's export capacity, including by accelerating projects to lay pipelines and build storage facilities and pumping stations.

Iraq’s Opec national representative, Mohammed Saadoun, said such projects should bring 150,000-250,000 b/d of additional export capacity next year. He told Energy Intelligence this week the aim is to boost total export capacity by up to 1.5 million b/d by 2025 or the first half of 2026.

New Opportunities

Iraqi crude represents a potentially attractive alternative to Russian Urals for European buyers after the EU embargo takes effect next week.

State oil marketer Somo appears to have been adjusting its prices with this in mind, raising the price for December-loading Basrah Medium to Europe by $1 per barrel versus the dated Brent benchmark, and 80¢/bbl relative to the formula price of rival Saudi grade Arab Medium.

Vessel-tracking data indicate that exports to India, which was invariably Iraqi crude’s top destination in March 2021-May 2022, have suffered from rising volumes of discounted Russian Urals being pushed East since then.

Conversely, Iraqi crude shipments to Europe have risen, averaging 870,000 b/d in the six months to October, up from an average of 650,000 b/d last year.

Turkey is exempt from the EU embargo on Russian oil, which it continues to import in relatively large volumes.

But there is still huge uncertainty about G7-linked shipping related to the planned price cap, and Energy Intelligence understands that Socar’s Star refinery in Turkey plans to buy more Basrah Medium and Basrah Heavy from December.

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

Kurdish Reservations

Kurdish crude, also known as KBT, is an obvious candidate to replace Urals in the Mediterranean owing to its quality and its proximity. But the supreme court ruling in February that challenged the legality of Iraqi Kurdistan’s independent oil sales has deterred some buyers.

“A lot of buyers are still buying. But [some] have decided not to,” says one well-placed market source. “They don’t want to get entangled in legal stuff. So that has put a dampener on [KBT].”

Vessel-tracking data appears to bear out the claim, with neither Spanish refiner Cepsa and Italy’s Saras having taken the grade in more than six months. Formerly both were regular buyers of KBT.

Iraqi Mideast Gulf Loadings, October 2022
DateVol. ('000 bbl)VesselQualityLoading PointDestinationLifter
Oct 1981LANDBRIDGE WISDOMBMSPM 2NetherlandsShell
Oct 1979LANDBRIDGE WISDOMBMSPM 2USShell
Oct 2960YUAN DONG HAIBMBerth 2Netherlands--
Oct 3998DELTA SKYBMSPM 2TurkeyTupras
Oct 3973CLASSICBHSPM 1IndiaBPCL
Oct 3960KRITI KINGBMBerth 4GreeceMotor Oil
Oct 3962CHIOS IBMSPM 3IndiaHPCL
Oct 3635JAG LALITBHSPM 5IndiaMRPL
Oct 3981COSLUCKY LAKEBHSPM 5EgyptEGPC
Oct 3971COSLUCKY LAKEBHSPM 5ChinaUnipec
Oct 3996EVAGORASBMBerth 3GreeceHellenic
Oct 51,924NEW NAXOSBHSPM 5IndiaReliance
Oct 51,960NEW HORIZONBHSPM 3ChinaHengli
Oct 6981KASSOS IBHSPM 1PhilippinesShell
Oct 6971KASSOS IBHSPM 1SingaporeShell
Oct 61,960PACIFIC LOYALTYBMBerth 1Europe--
Oct 61,975NEW JOVIALITYBMBerth 3South KoreaKNOC
Oct 61,004V GLORYBMBerth 3South KoreaGS Caltex
Oct 61,931POROSBMSPM 3ChinaZhenhua
Oct 7993NISSOS TINOSBMBerth 2TurkeyTupras
Oct 71,960ISLAND SPLENDORBMBerth 4ChinaSinochem
Oct 7770DESH RAKSHAKBMBerth 4IndiaMRPL
Oct 81,960DESH VIRAATBHSPM 5ChinaSinochem
Oct 81,960C.PASSIONBMSPM 2South KoreaGS Caltex
Oct 11972FAITHFUL WARRIORBHSPM 3IndiaReliance
Oct 111,926PRINCESS MARYBMSPM 2ChinaSinochem
Oct 111,966DESH UJAALABHSPM 3IndiaReliance
Oct 11485MELTEMIBHSPM 1ItalySaras
Oct 11488MELTEMIBMSPM 1ItalySaras
Oct 11957SEAWAYS MCKINLEYBMBerth 2South KoreaSK Energy
Oct 12992DELTA COMMANDERBMBerth 4ItalyEni
Oct 12989SAMOSBMBerth 3IndiaMRPL
Oct 121,960NEW FRONTIERBMBerth 1ChinaUnipec
Oct 12991KAROLOSBHSPM 5IndiaNayara
Oct 131,960NEW VISIONBMSPM 1NetherlandsExxon Mobil
Oct 131,960DIODORUSBMSPM 2ChinaSinochem
Oct 14994MINERVA KALYPSOBHSPM 5IndiaNayara
Oct 141,960DONOUSSABHSPM 3ChinaUnipec
Oct 17975FRONT CLIPPERBHSPM 5SpainRepsol
Oct 171,931ELANDRA DENALIBMSPM 1ChinaUnipec
Oct 171,920NEW VISTABMBerth 1ChinaUnipec
Oct 17967HABRUTBHSPM 3South KoreaHyundai
Oct 181,825KALLISTABMBerth 3ChinaUnipec
Oct 191,920NEW HARMONYBMBerth 2ChinaUnipec
Oct 191,830NEW LAURELBMSPM 2ChinaUnipec
Oct 19995ANTIGUA IBHSPM 5IndiaReliance
Oct 20959DHT SUNDARBANSBMBerth 1USMarathon
Oct 201,960OMEGA TRADERBHSPM 5India--
Oct 201,960BRIGHT PIONEERBMSPM 3IndiaIOC
Oct 20960SEAWAYS HENDRICKSBMBerth 4NetherlandsShell
Oct 20967PISSIOTISBHSPM 1IndiaHPCL
Oct 21961SM VENUS 2BHSPM 3South KoreaGS Caltex
Oct 221,960YASA SOUTHRN CROSSBMSPM 2ChinaUnipec
Oct 231,920FRONT EMINENCEBMBerth 2China--
Oct 23995CONCORDBMBerth 3IndiaIOC
Oct 24960C.VISIONBMBerth 1South KoreaSK Energy
Oct 24972DESH VIBHORBHSPM 1IndiaIOC
Oct 24970DESH VIBHORBMSPM 1IndiaIOC
Oct 25958HILLAHBMBerth 1ChinaSinochem
Oct 25960MARAN HERCULESBMBerth 3SpainRepsol
Oct 251,928DELOSBMSPM 3USMarathon
Oct 25960KRITI VIGORBMBerth 4GreeceMotor Oil
Oct 25960JULIUS CAESARBMBerth 3EuropeShell
Oct 26975ADVENTUREBHSPM 2IndiaIOC
Oct 26975ADVENTUREBMSPM 2IndiaIOC
Oct 26971V PROSPERITYBHSPM 1South KoreaGS Caltex
Oct 261,921NEW PRIMEBHSPM 5ChinaRongsheng
Oct 27954NEW MELODYBHSPM 5EuropeExxon Mobil
Oct 271,960COSGRACE LAKEBMBerth 2ChinaSinochem
Oct 28996DEMETRIOSBMSPM 1IndiaHPCL
Oct 291,960YIOBHSPM 3IndiaBPCL
Oct 29961NEW ACHIEVEMENTBMSPM 2ChinaZhenhua
Oct 30974DELTA IOSBHSPM 3IndiaIOC
Oct 31683ELENIBMSPM 3IndiaIOC
Oct 311,920YUAN GUI YANGBMBerth 2USMarathon
Oct 311,907C. CHAMPIONBHSPM 5South KoreaSK Energy
Oct 311,933DESH UJAALABMSPM 1IndiaIOC
Total ('000 bbl)102,124----------
Total ('000 b/d)3,294----------
Iraqi Loadings Ex-Ceyhan, October 2022
DateVol. ('000 bbl)VesselQuality Loading PointDestinationLifter
Oct 1600NEVERLANDKurdish crudeCeyhanItaly--
Oct 3600VALFOGLIA Kurdish crudeCeyhanItalyPetraco>Sonatrach
Oct 41,000MINERVA VERAKurdish crudeCeyhanChina--
Oct 7600SCORPIOKurdish crudeCeyhanItalyAPI
Oct 8241PipelineKirkukCeyhanTurkeyTupras
Oct 10600VALLESINA Kurdish crudeCeyhanCroatiaPetraco>Mol
Oct 10241PipelineKirkukCeyhanTurkeyTupras
Oct 12197PipelineKirkukCeyhanTurkeyTupras
Oct 12600KRITI GALAXYKurdish crudeCeyhanItaly--
Oct 14600MINERVA ZOEKurdish crudeCeyhanItaly--
Oct 15541T.SEMAHATKirkukCeyhanTurkeyTupras
Oct 18240PipelineKirkukCeyhanTurkeyTupras
Oct 20600KRITI SAMARIAKurdish crudeCeyhanItalyAPI
Oct 201,000LIPARIKurdish crudeCeyhanItalySonatrach
Oct 211,000GLORIA MARISKurdish crudeCeyhanGreeceMotor Oil
Oct 21600VALFOGLIA Kurdish crudeCeyhanItalyPetraco
Oct 21242PipelineKirkukCeyhanTurkeyTupras
Oct 22600KRITI BASTION Kurdish crudeCeyhanRomaniaPetraco>Petrom
Oct 25241PipelineKirkukCeyhanTurkeyTupras
Oct 25600NEVERLANDKurdish crudeCeyhanItalyAPI
Oct 251,000VILAMOURAKurdish crudeCeyhanIsrael--
Oct 27600VALLESINAKurdish crudeCeyhanItalyPetraco
Oct 28241PipelineKirkukCeyhanTurkeyTupras
Oct 281,000MELODIA Kurdish crudeCeyhanGreeceMotor Oil
Oct 30238PipelineKirkukCeyhanTurkeyTupras
Oct 311,000SEADANCERKurdish crudeCeyhanGreeceMotor Oil
Total ('000 bbl)15,033----------
Total ('000 b/d)48578 kirkuk--------

Simon Martelli, London