Following the deterioration of the infrastructure of the Iraqi oil export pipeline system, which is more than 70 years old, a recent press report highlighted a set of risks facing the Iraqi oil sector.
Experts have reported that the oil sector is the sole source of Iraq’s annual budget and it relies heavily on the daily pumping of millions of barrels of oil to different continents worldwide. However, there is still a need for development projects that can enhance the production capacity of crude oil to six million barrels per day.
An official from the Oil Marketing Company (SOMO) stated in a press report that they have plans to undertake projects to enhance the marine export pipeline system used to transport oil. However, due to the delay in approving the budget, and further postponement after the approval, the implementation of these projects has been affected. As a result, these projects are likely to be postponed until next year.
Iraq has abundant oil resources, but war and corruption have left the country with a dilapidated infrastructure.
The anonymous official explained that the pipeline system aims to increase Iraq’s crude oil export capacity to 6 million barrels per day.
Last year, the Basra Oil Company announced a major project to develop marine export pipelines. The project involves laying two 48-inch pipelines, rehabilitating the ports of Basra and Al-Amaya, building a marine platform, and installing measuring devices to enable flexibility in exporting different types of oil.
In May, the Iraqi Council of Ministers awarded the project to establish the third marine export pipeline to the Basra Oil Company, under the custody of the Dutch company Boskalis. The pipeline has a diameter of 48 knots and an operational capacity of two million barrels per day. The project was awarded for approximately $420 million. However, on June 21st, the Iraqi government suspended the decision related to the third marine pipeline project without providing any reasons.
The Arab World News Agency (AWP) reported that Iraqi oil expert Kovind Sherwani stated that the current government is highly interested in developing the country’s oil sector at all levels. With the recent increase in global oil prices, the financial abundance makes the implementation of large-scale projects feasible in the near future.
Sherwani stated that Iraq is currently experiencing significant challenges with its marine and land export systems. There is a pressing need to upgrade the marine export pipelines that transport oil, as the existing pipelines are in a state of disrepair and are susceptible to leaks, despite undergoing frequent repairs.
He went on to say, “The current export system in Iraq has been in place for over 70 years and urgently needs new projects to create export pipelines that will significantly increase capacity. However, implementing such large-scale projects requires huge financial investments and must be included in the budget to make them binding on the Iraqi government.”
In December of last year, SOMO unveiled a plan to upgrade marine pipelines in order to increase exports by 900,000 barrels per day.
According to Iraqi oil expert Bilal Khalifa, it is estimated that the cost of developing a marine export pipeline system would be more than 15 billion dollars. This is one of the reasons why the project is being delayed due to Iraq’s unstable economic conditions, despite the presence of international loans to complete it. There may also be technical or legal reasons that are not yet known.
Al-Khalifa emphasized the urgent need for upgrading the marine export pipeline system. The current system is outdated and almost in ruins, making it incompatible with the current production capacity. Therefore, the development process must be expedited to keep pace with the growing demand.
According to S&P Global, loading volumes at Iraq’s aging facilities in Basra are unlikely to increase in the near future. This could prevent any meaningful gains in production and hinder the country’s ability to benefit from higher oil prices.
According to oil expert Hamza Al-Jawahiri, the development of the oil-carrying pipeline system will increase Iraq’s export capacity by about 1.5 million barrels per day. This is a positive development for Iraq, especially if there is an increase in production and export by a decision from OPEC (the Organization of the Petroleum Exporting Countries).
Al-Jawahiri stated that significant oil projects often face obstruction and delay in their progress. This is contributing to the slow development of Iraq’s oil and gas sector over the past few years. Hence, the Ministry of Oil needs to focus on these projects, especially since the country relies solely on oil to support its financial budgets.
During his speech, he emphasized the importance of engaging with specialized international companies to develop the marine export pipeline system and create new pipelines. He pointed out that there are companies with expertise in this area, and national oil companies can benefit from their experience by supporting their work.
