Iraq Crude Exports Surge in South While Violence Hits North

Iraq’s crude oil exports from its southern terminals in the Persian Gulf are poised to accelerate 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. That’s 11 percent more than this year’s average and would be close to matching a three-decade high reached 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 following 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 yesterday. “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 on 17 June. 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 on 17 June.

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 on 17 June.

Rising exports in the south, helped by the start of a third tanker-loading point this month, contrast with the situation for Kirkuk crude. This light grade from the northern field of the same name 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.

Brent Gains

Brent crude fell as much as 0.4 percent on 18 June on the ICE Futures Europe exchange after closing on 17 June at $113.45 a barrel, the highest in more than nine months. U.S. benchmark grade West Texas Intermediate was up 6 cents at $106.42 on the New York Mercantile Exchange.

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 the Organization of Petroleum Exporting Countries as its gains help offset losses from Libya, they said.

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 on 17 June. Output surged to 3.4 million barrels a day in February, the highest level since 2000, and was 3.3 million last month.