Iraqi oil in the grip of the Strait of Hormuz… Will alternatives succeed in rescuing exports?

Baghdad – Since the onset of the Hormuz Strait crisis, Iraq has been racing to secure alternative routes for exporting its crude oil amid limited Iranian permits for tankers carrying Iraqi crude. After the country used to export about 3.6 million barrels per day, volumes have fallen to roughly half that level, while land routes have so far failed to fill the export gap.

Regarding the implications of a possible blockade on Iran and its impact on Iraq’s oil exports, Oil Minister spokesperson Saalim Al‑Rukabi told Al Jazeera Net that Iraq has alternative ports and options for exporting crude, including the Syrian and Turkish ports, in addition to continuing sales under a delivery‑at‑port mechanism, whereby buyers bear the responsibility for transporting the crude after purchase.

He said that fluctuations in oil prices are normal in crude markets, and Iraq relies on the global price for its sales, following a sale mechanism based on delivery of tankers at ports. He added that the Ministry of Oil is working to export the largest possible quantity of crude to boost federal general budget revenues amid the volatility in oil markets and regional developments.

Iraq Marketing Company (SOMO) has issued a tender to sell Basra crude in September next year for loading outside the Hormuz Strait via transfers from one tanker to another near the coast of Oman, in the second tender this week, after closing yesterday Wednesday the tender to load shipments from its oil terminal in Basra, which requires buyers to charter oil tankers to enter the Hormuz Strait.

The oil expert confirmed that transport by trucks and maritime carriers does not compensate for the volumes that pass through the Hormuz Strait, due to high transport and insurance costs and long routes, estimating that Iraq could lose 70 % to 80 % of its export capacity until lines connecting the southern fields in the modern region northwest of Iraq are completed, and then to the Syrian port of Banias.

Sadiq added that increasing production to compensate for falling prices would not be profitable currently, because a large portion of revenues would go to transport, shipping, and insurance costs, and moreover, increasing supply amid weak demand could push prices further down. He believes that raising production would become appropriate when navigation resumes or when actual export capacity is available via the Gihan.