• Reuters


Iraq’s Sunni Islamist insurgency has further crippled the nation’s dream to match the oil power of Saudi Arabia, making oil fields in the safer south even more vital — but even that region has not been completely free from attacks.

Baghdad is struggling to contain the Islamic State militancy, which seized some oil facilities when it swept through the northwest in June, emboldening the Kurds in their autonomous northern region to capture the giant Kirkuk oil fields.

There has been little impact on southern oil output, which is around 3.15 million barrels per day.

The south’s oil capital of Basra has seen less violence this year than other cities, but there have been a few car bombs, assassination attempts and kidnappings of foreign workers there over the past several months, security and oil sources say.

It is not clear who was behind those attacks. The line between insurgency and crime is often blurred.

History suggests nothing can be ruled out. In 2011, bombings of southern pipelines disrupted output from the Rumaila oil fields, Iraq’s largest, at least twice.

Thamer Ghadhban, top energy adviser to Prime Minister Nouri al-Maliki, said at present everything “is going on as planned,” with southern output unaffected and national output targets in place.

Over the past few years, poor infrastructure and technical problems have forced Baghdad to scale back ambitions of reaching output capacity of 12 million barrels per day by 2020, a level eclipsed only by Saudi Arabia’s 12.5 million bpd.

Now even Iraq’s new long-term capacity target of 8.4 million bpd is overly optimistic, industry experts and analysts say.

The southern export facilities have remained insulated from the turmoil; oil exports in July averaged 2.442 million bpd, near a record rate.

Around 300,000 to 400,000 bpd of crude used to move through the northern pipeline from Iraq’s Kirkuk in the north to Turkey’s Ceyhan before the flow was halted by a bombing in February, Ghadhban said.

“Kirkuk and other areas have been affected by the security situation — without a doubt that will have an effect” on Iraq’s output in the short term, he said.

Iraq has previously said it aimed to boost oil production to 3.7 million bpd in 2014, a figure that excludes Kurdish crude, as Baghdad is locked in a legal and diplomatic dispute with the autonomous Kurdish region over oil sales and exports.

Ghadhban conceded Iraq is now unlikely to reach its 2014 output target.

Some industry experts see 3.4 million bpd as more feasible this year. A Merrill Lynch research note in June said output was unlikely to grow at all this year.

Major attacks on southern oil facilities appear unlikely. Luay al-Khatteeb, visiting fellow at the Brookings Doha Center, said it would be hard for Sunni insurgents to infiltrate the Shiite south.

“They can send suicide bombers with a one-way ticket, but they do not have the hosts compared to territories they control in the west of Iraq,” he said.

Jabar al-Saadi, head of the Basra provincial council’s security committee, said Iraq has tightened security and deployed extra troops around southern oil infrastructure.

There is the risk, too, that new projects to boost Iraq’s oil production, export and refining capacities may be delayed for months or years or canceled entirely, as foreign companies balk at taking on further investment risks.

ExxonMobil has carried out a “major evacuation” of staff from Iraq and BP has evacuated 20 percent, the head of state-run South Oil Co. said in June.

Islamist militants have launched a Twitter campaign naming companies working in Iraq such as ExxonMobil and Royal Dutch Shell as “a legitimate target for every Muslim.”

In May, the U.S. Embassy and British officials warned that their citizens, particularly oil workers, in Basra may be at risk of kidnapping by militant groups.

Baghdad had planned to build a strategic pipeline from its Basra fields through Turkey and Syria, and another one to Jordan. Such projects are unlikely to materialize any time soon.

The International Energy Agency said last month that prolonged sectarian bloodshed may shake investor confidence and set back longer-term growth in Iraq.

Iraq’s actual output by 2020 also depends on global oil demand and possible OPEC quota restrictions, which Baghdad is currently exempt from.

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