Iraq’s oil exports set to fall sharply next month

Reuters

BAGHDAD: Iraq’s oil exports are stagnating compared with a year ago and are set to fall sharply next month while major work is carried out at its vital southern export terminals, industry sources said.
Infrastructure and security problems are making Iraq struggle to keep pace with last year’s rates, although Baghdad is confident of a big rise in production by the end of the year after the start-up of the giant southern Majnoon oilfield.
Iraq’s overall exports of 2.324 million barrels per day (bpd) in July were down a small fraction on June, Iraq’s oil ministry spokesman Asim Jihad said. They are just below levels a year ago.
Southern Basra Light exports are expected to drop by 500,000 bpd in September while metering equipment is installed at the terminal.
Iraq’s major customers say state oil marketer SOMO is suggesting cuts next month of 25 percent in liftings of the main Basra Light grade, which have been running at around 2.1 mln bpd.
Because there is a lack of storage capacity in the south, the export cut will force a decrease in production on nearly the same scale.
Output of crude oil in 2013 has averaged 2.9 million bpd — flat on last year — although flows climbed to 3.25 million bpd at the start of August, Jihad said.
OPEC’s second biggest producer expects output to rise by 400,000 bpd by the end of this year due to the start up of the Royal Dutch Shell-operated Majnoon oilfield in southern Iraq and other smaller sources, Jihad said.
The government has set a production target of 3.4 million bpd for end-2013, down from an initial 3.7 million bpd. If the Majnoon and other increases are realized, Iraq will exceed the reduced target rate by the end of the year.
Unless there is a big burst of production from the oilfield start-ups, however, Baghdad will report an overall annual output decline for 2013 — its first after two years of robust gains — industry sources said.
“Production from the Majnoon oilfield should start in October,” Jihad said. The oil minister had previously given July as the start date.
After idling for years due to wars and sanctions, Iraq’s output began to rise in 2010 after it secured service contracts with large oil groups such as BP, Shell, Eni and Exxon Mobil.
Since then, output has risen by 600,000 bpd to around 3 million bpd thanks to higher flows from the giant southern fields of Rumaila, West Qurna-1 and Zubair.
To continue its production increases, Iraq will need to start up other southern fields apart from Majnoon, such as West Qurna-2, run by Russia’s Lukoil. Garraf, also in the south, and Badra — farther north — will also contribute.