x Abu Dhabi, UAESunday 23 July 2017

Iraq still has Syria in its oil pipeline

Iraq remains hopeful of building a pipeline through Syria as it seeks to diversify markets for rising oil output, said its chief oil official.

Hussain Sharistani, the deputy prime minister of Iraq sits down to speak to The National at the Armani Hotel. Razan Alzayani / The National
Hussain Sharistani, the deputy prime minister of Iraq sits down to speak to The National at the Armani Hotel. Razan Alzayani / The National

Iraq remains hopeful of building a pipeline through Syria as it seeks to diversify markets for its rising oil output.

A pipeline for Iraqi oil through Syria, should that country stabilise, would help to meet energy demand and offer needed transit revenues, said Iraq’s chief oil official Hussain Al Shahristani, the deputy prime minister for energy affairs.

“We need to connect to our neighbours,” he said in Dubai. “The situation in Syria is not encouraging. Our relationship with Turkey this year has not been as it should be.”

“We are moving ahead as fast as we can to construct a pipeline to Aqaba to the Red Sea. But on the positive side we are happy the situation in the Gulf has calmed down vis-à-vis Iran. We don’t really have any bottlenecks to move our oil to the international market.”

Iraq is eager to carve out new routes for its oil as it targets a rise in production capacity to 9 million barrels per day (bpd) by 2020, a goal many observers say is an ambition too far.

Excluding the Kurdish region of Iraq, the country pumped 3.3 million bpd today and was on track to hit 3.6 to 3.7 million bpd by the end of the year, said Mr Al Shahristani. The projected increases include up to 200,000 bpd at the Majnoon field being developed by Royal Dutch Shell.

How much Iraq will draw on its capacity in 2020 remained to be seen based on global appetite, he said.

“Most of you were not very confident that Iraq would be able to produce more than 5 million barrels per day” by 2020, he told a group of oil executives. “But let’s wait.”

Part of the uncertainty around Iraqi oil output arises from shale oil prospects in the United States, which the International Energy Agency (IEA) has said could surpass Saudi Arabia’s oil production by 2017. The US buys 27 per cent of Iraqi oil production, making it second only to Asia.

“For the US to be able to produce shale oil to replace its current imports of 8 to 9 million barrels would require thousands, perhaps ten of thousands of drilling rigs,” said Mr Al Shahristani. “And you can only produce a few months and then you abandon the well and move to another well. How economic is drilling going to be at that scale to replace all imports remains to be seen .

“I personally do not believe that the US can replace all its imports abroad with shale oil.”

Output from existing oilfields is forecast by the IEA and Opec to decline by 4 to 5 per cent a year through the end of the decade, compared with a rise in demand of about 1 per cent.

“Shale or tar sands would not substitute for the decline,” said Mr Al Shahristani. “Thus there is a serious need for additional oil supply. Iraq can easily find a market for its increased oil production.”

Iraq also faces competition from inside its borders. An independent pipeline capable of transporting 300,000 bpd of oil from the Kurdish region to Turkey is expected to be completed within weeks, making it possible for Kurdish producers to export regardless of objections from the federal government in Baghdad.

The Iraqi capital and Erbil, the principal Kurdish city, have been locked in a dispute over contracts and revenue-sharing for years.

In 2011, ExxonMobil became the first major to sign a contract in Kurdish Iraq, paving the way for other heavyweights such as Total and Chevron to follow.

“This is not for the oil companies to decide and then interpret our constitution and then decide who has the right,” said Mr Al Shahristani. “We believe that Exxon has committed a serious error … This has to be sorted out with them.”

ayee@thenational.ae