Iraq Oil Exports Surge in South While Violence Spreads in North
Bloomberg News
Iraq's oil exports from its southern terminals in the Persian Gulf are poised to surge at a time when fighting has plunged the country's north into chaos and Islamist militias are advancing toward Baghdad.
Exports of Basrah Light crude, the country's main grade, may reach about 2.8 million barrels a day next month, according to a preliminary loading plan obtained by Bloomberg News yesterday. That's 11 percent more than this year's average and would be close to a three-decade high of 2.799 million barrels that Iraq said were exported from all its ports each day in February. OPEC's second-largest producer shipped 5.43 million barrels from Basrah on June 11, Iraqi Oil Minister Abdul Kareem al-Luaibi said in Vienna the next day.
'The only infrastructure that is currently producing and supplying international markets is in the south and will remain untouched,' Kyle Stelma, managing director of Dubai-based Dunia Frontier Consultants, which researches Iraq for clients, said by phone. 'They are systematically increasing production and export capacity, so, on average, we should keep seeing new monthly records being set.'
Fighters from the Islamic State in Iraq and the Levant clashed with government forces about 55 kilometers (34 miles) north of Baghdad today. Southern Iraq, where about three quarters of the nation's oil is produced, remains 'calm,' Thamir Ghadhban, an adviser to Iraq's Prime Minister, said at the Iraq Petroleum Conference in London today.
Stability Needed
'We're seeing growth because the Iraqis have invested in export capacity and new spending has been put into fields to add production,' David Wech, managing director of researcher JBC Energy GmbH in Vienna, said by phone today. 'I won't be surprised if they ship 2.8 million barrels a day. We need to see if they can maintain it and keep the infrastructure working.'
Rising exports in the south, helped by the start of a third tanker loading point this month, contrast the situation for Kirkuk crude, a light grade from the northern field of the same name, that hasn't been exported since March when attacks damaged a pipeline to the Turkish port of Ceyhan. Repair work ceased this month when fighting started.
While the south is safe from attack now, strife will hurt Iraq's investment climate and slow the pace of oil production and export growth, HSBC Holdings Plc analysts Peter Hitchens and Gordon Gray said in a note. Iraq has been playing a key role in output among Organization of Petroleum Exporting Countries as its gains help offset losses from Libya, they said.
Biggest in OPEC
Iraq is targeting production of 8.4 million barrels a day after 2018, al-Luaibi, the oil minister, said June 9 in Vienna. Most analysts expect capacity to reach only about 6 million barrels a day this decade, Gray, Hitchens and Stelma said.
Capacity will increase by 1.28 million barrels a day in the six years through 2019, the most of any nation in OPEC, the International Energy Agency said today. Output surged to 3.4 million barrels a day in February, the highest level since 2000, and was 3.3 million last month, according to data compiled by Bloomberg.
'The building of infrastructure to export crude oil is facilitating export growth this year and potentially into next,' Citigroup Inc. analysts led by Ed Morse wrote in a June 13 report. Still, the fighting 'points to a systemic and seismic shift geopolitically' in Iraq, making it more of a challenge to sustain that growth, according to Citigroup.
To contact the reporter on this story: Anthony DiPaola in Dubai at adipaola@bloomberg.net
To contact the editors responsible for this story: Alaric Nightingale at anightingal1@bloomberg.net Rachel Graham
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