Major pipeline rupture deepens Iraqi oil export worries
Monday, 16 September 2013
LONDON: Iraq’s oil exports have been cut sharply by a pipeline leak and work at southern ports, industry sources said, raising concern among buyers of prolonged outages despite Iraqi assurances of a swift return to normal.
Baghdad’s oil revival, which got under way in 2010, has slowed this year due to infrastructure and security problems, keeping production far below projected targets and sometimes even below last year’s levels of three million barrels per day (bpd).
An Iraqi oil official said last week that exports from the Basra Oil Terminal would be constrained for about a month from the middle of September while metering equipment is installed, even though the work itself would continue into 2014.
Iraq exports the bulk of its oil from its southern terminals and supplies in September have already fallen by 500,000 barrels per day (bpd), according to shipping data. Some buyers of the crude were expecting a longer reduction in shipments.
“They claim it won’t affect exports but to be honest I think it will last some time,” said one customer, who declined to be identified by name.
A prolonged reduction in supply from Iraq would add to losses such as the virtual shutdown in Libyan exports, further tightening the market and helping to support oil prices which are trading near $110 a barrel.
Southern shipments have averaged 1.83 million bpd in the first 15 days of September, according to shipping data. That is down from August’s average of 2.31 million bpd, and on a par with the 1.8 million bpd initially scheduled in September.
Supplies were even lower yesterday as Iraq has had to cut output sharply from its biggest southern producer Rumaila due to a pipeline leak, two industry sources and an Iraqi oil official said. The leak in the ageing pipeline - buried three metres underground - started around five days ago due to corrosion and operations to fix it are continuing, said an official at Iraq’s Southern Oil Co.
As a result, output has been cut from the Rumaila North oilfield, which was producing around 600,000 bpd before the stoppage. A second source put the loss at at least 450,000 bpd.
“We are replacing the damaged part due to corrosion and welding operations need to be done very carefully to avoid unexpected incidents,” the Iraqi official said.
Oil buyers expect the loading rate to fall further this month as two of the berths at the Basra Oil Terminal need to be closed in the early stages of planned work.
With two of the four berths at the terminal not in use, southern export capacity is around 1.7 million bpd, a trading source said.
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