Tuesday, February 21, 2012

Iraq: Iraq Boosts Oil Export Capacity

This article originally appeared in the Institute for War and Peace Reporting, www.iwpr.net

Iraq Boosts Oil Export Capacity

New project inaugurated in Basra as part of long-term energy strategy, but can domestic production keep pace?

A plan to triple Iraq’s oil exporting capacity took off with the inauguration of the first floating terminal in the Gulf port of Basra this week.

The new Single Point Mooring, SPM, can process 850,000 barrels per day, and is the first of five similar terminals intended to increase Iraq’s export capacity from 2.1 million to over six million barrels per day. The other four should be in use by the end of 2013.

Iraq’s export expansion plans for the Gulf include two undersea and one onshore pipeline, as well as the five SPMs for loading tankers.

Oil ministry spokesman Asem Jihad welcomed the five-terminal project, located in Al-Faw, south of Basra.

“It’s one of the largest and most important projects in Iraq, and has no precedent,” he said. “The opening of this port is part of the ministry’s plans to raise export capacity over the next few years.”

Iraq currently produces 2.9 million barrels a day, but – under deals reached in 2008 when the government awarded 15 oil and gas deals to international firms such as Shell, Exxon Mobil, BP and Total – the plan is to increase daily output to rise to 12 million barrels by 2017.

Iraq has the world's third-largest oil reserves, and 95 per cent of its revenue comes from oil exports, so increased production has to be linked with improved capacity to export.

“This is why this project is of such strategic importance to Iraq,” said Jihad.

Some experts question the strategy, arguing that it is not viable because the oil industry infrastructure is in such poor shape after decades of war and international sanctions.

Raad Qasim, an oil engineer, told IWPR that production levels of 12 million barrel per day by 2017 were unrealistic.

“How can a country with damaged oil institutions and a lack of professional staff reach such a production level in such short space of time?” asked Qasim. “And another factor should be taken into account – the widespread corruption in government departments.”

Oil officials said that the terminal inaugurated this week was just part of efforts to address infrastructure constraints.

Uday al-Quraishi, an operations director at the oil ministry, explained that the new project would boost the industry’s overall capacity because it included “pipelines and tanks as well as ports”.

Faruk Mohammed, an oil expert and retired technical manager at the South Oil Company, told IWPR that an increase in oil production, if it was synchronised with the right export facilities, would “definitely enhance Iraq's economy and improve living standards for Iraqi people, who have suffered a lot of injustice in recent years”.

“Such projects will undoubtedly be a step towards the prosperity that all Iraqis dream of,” he said.

Ali Sarhan is an IWPR-trained journalist based in Basra. IWPR Iraq editor Abeer Mohammed contributed reporting to this story.