IOR Magazine: October 2018
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10 YEARS OF INFORMING, ENGAGING AND EMPOWERING STAKEHOLDERS IN IRAQ | OCTOBER 2018 INSIDE Baiji refinery begins its 2 comeback Iraq seeks sanctions waiver on 4 vital Iran energy trade Q&A: SOMO Director General Alaa al-Yassiri Iraq's oil marketing chief discusses rising export capacity, OPEC dynamics, oil trading joint ventures, and the status of a nascent hedging program. After setting an all-time monthly export record in August, Iraq’s oil sector is aiming for even greater heights. Flares at the Nahr Bin Omar oil field on Jan. 12, 2017. As the director general of the State Oil Marketing Organization (SOMO), Alaa al- Iraq poised to capitalize on OPEC supply drops Yassiri is looking to capitalize further on the country’s rising output. With more than 300,000 bpd of new capacity coming online this year, Iraq is well positioned to take market share as U.S. sanctions snap back on Iran. see SOMO, page 9 Iraq’s production capacity is likely to ex- poses sanctions on Iran and its oil exports. ernment and autonomous Kurdistan Regional pand by more than 300,000 barrels per day OPEC members, along with Russia and Government (KRG) currently have a combined (bpd) by the end of the year, according to other non-OPEC producers, met in Algeria capacity of about 5.13 million bpd - more than an Iraq Oil Report analysis, highlighting the on Sept. 23 to discuss a potential output 300,000 bpd higher than countrywide produc- country’s ability to help compensate for sup- increase to compensate for recent losses tion in August, of 4.81 million bpd. ply disruptions from other OPEC members. of supply, including from Iran – and Iraq is About two-thirds of that unused capacity The Oil Ministry is unlikely to take full ad- well positioned to help fill the gap. resides at two fields under federal government vantage of rising capacity because of other Iraq Oil Report has gathered data from control in Kirkuk - Bai Hassan and the Avana infrastructure bottlenecks, but Iraq’s produc- each of the country’s producing fields to as- Dome of the Kirkuk field - which are partially tion potential still shows its growing impor- sess current production, current capacity, shut in because there is no available route to tance to global oil markets - and U.S. foreign and expected capacity by the end of 2018. market for their full capacity. They could in- policy - as the Trump administration re-im- The analysis shows that Iraq’s federal gov- crease production if authorities in Baghdad and see OPEC, page 7 DELIVERING THE FUELS THAT ENERGIZE PROSPERITY www.iraqoilreport.com Baiji refinery begins its comeback Despite ongoing violence, the Baiji refinery's resumption of operations marks progress in Iraq's northern oil sector. The Baiji refinery, taken offline by the war with the self-proclaimed Islamic State (IS) militant group in 2014, has partially re- sumed operations. The 70,000 barrel per day (bpd) Salahad- din-2 unit of the refinery is operating again, albeit not yet at full capacity due to inad- equate power and crude supply, according to a senior North Oil Company (NOC) offi- cial, a Baiji worker, and an industry official. Even if the unit is brought fully online, the re- finery will be operating at less than one-quarter of its former capacity, of 310,000 bpd. But the facility’s nascent comeback still highlights the progress that Iraq’s oil sector has made since territory has been reclaimed from IS control. The Salahaddin-1 unit, which also has a 70,000 bpd capacity, is being refurbished and is expected to begin operations by the end of the year. The oil refinery in Baiji, in 2009. When Baiji went offline, on June 16, 2014, the loss of the country’s largest refin- where NOC-operated fields have been shut- the summer of 2014 and October 2017. The ery was a devastating blow to the oil sector ting in nearly 200,000 bpd of production be- fields can produce as much as 280,000 bpd, and the broader economy. After Baiji was cause there is nowhere to send the crude. and increasing capacity at Baiji should help finally liberated in the summer of 2015, the NOC has produced more than 200,000 bring more of that capacity back online. facility was initially thought to have been bpd since June 2018, with crude flowing to There have been a number of obstacles damaged and looted beyond repair. the Kirkuk refinery; the Baziyan refinery in to the resurgence of Iraq’s northern oil sec- But the Salahaddin-2 unit was largely intact, Sulaimaniya; the Kalak and Ninewa refiner- tor, however, including persistently poor se- and the state-run North Refineries Company ies in Erbil; Baghdad-area power plants and curity. Attacks continue on security and oil (NRC) has been working to bring it online. It be- refineries; and the Siniya refinery, near Baiji. workers and energy sector facilities and in- gan testing at 3,500 bpd in early September, and About 90,000 bpd of NOC’s production has frastructure all throughout northern Iraq. ♦ efforts are ongoing to push it closer to capacity. recently been coming from the Bai Hassan The revival of Baiji is likely to help Iraq field and the Avana Dome of the Kirkuk field, READ THE FULL STORY @ unlock some stranded capacity in Kirkuk, which had been under KRG control between www.iraqoilreport.com New to Iraq Oil Report? Discover what you’re missing. Sign up today for a free trial. www.iraqoilreport.com/trial Protecting people and assets in a complex world GardaWorld, the world’s largest privately owned security company, has been providing mobile, static and consulting security services to the oil and gas sector in Iraq for over 20 years. 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Iraq is negotiating with the U.S. for ex- Iraq’s gas and power imports from Iran But despite the looming sanctions dead- emptions from the impending snap-back accelerated during the Obama administra- line, the Iraqi electricity sector’s reliance on of sanctions against Iran, arguing that it tion, in the context of a multi-lateral deal to Iran has been steadily increasing. cannot cut consumption of Iranian electric- relax U.S. and European sanctions against In 2017, Iran began sending gas through ity and natural gas immediately without Iran’s energy sector in exchange for an in- a newly completed pipeline, which crosses suffering serious economic harm and so- spection regime designed to ensure the the border in Diyala province and then cial instability. freeze of Iran’s nuclear weapons programs. dog-legs southward to Baghdad. An Iraqi delegation was in Washington in But now that the Trump administration That pipeline is now averaging about late September seeking a waiver for its cross- has decided to walk away from that deal, 1,250 million standard cubic feet per day border trade, meeting with senior officials in Iraq is scrambling to adjust to the new re- (mscf/d), according to the senior Ministry the State Department, Treasury Department, ality. Even though the U.S. is re-imposing of Electricity official, and is responsible for and National Security Council, according to sanctions without its European allies, it still more than 4,000 megawatts of combined multiple officials familiar with the talks. wields the potent ability to restrict access power generation at multiple gas-fired power plants. To the south, a second newly built gas pipeline crosses the border into Basra province, carrying about 250 mscf/d, ac- cording to the Electricity Ministry official. An Iranian company Tadbir built and tested the pipeline, but it cannot be confirmed at time of publication if it is the same Tadbir that is sanctioned by the U.S. government. Iranian gas began flowing to the Iranian- built Rumaila investment power plant in July, according to an official in the Basra Electricity Directorate, adding 310 megawatts to the grid. That plant was built and commissioned by Ira- nian company MAPNA Group, which is still do- ing work at the site directly and supervising its local partner Shamara Holding Group. Iraq has also been importing electricity directly from Iran, via cross-border lines. In the hot summer months of 2017, Iranian U.S. President Donald J. Trump greets Iraqi Prime Minister Haider al-Abadi at the White House supply to Iraq averaged over 1,300 mega- on March 20, 2017 in Washington DC. watts, according to Electricity Ministry data A central point of contention appears to to the dollar market - a serious threat for obtained by Iraq Oil Report.