Iraq acts to counter Iran oil threat

Oil tankers anchored at Basra harbour. AFP

Iraq's cabinet has approved a contingency plan to increase the country's options for exporting oil after Iran threatened to close the Strait of Hormuz.

The bulk of Iraq's crude reaches the world market via the Basra export hub in the south of the country, where oil is loaded on to tankers and shipped though the strait.

But Iraq also has a pipeline running from Kirkuk in the north through Syria to the port of Ceyhan on the Turkish Mediterranean coast that could be developed.

"Short and mid-term plans will be through boosting crude pumping and upgrading export capacity via Ceyhan port in Turkey.

"Also to increase the number of trucks that are shipping crude," Ali Al Dabbagh, a government spokesman, said on Sunday.

Angered by Iran's refusal to abandon its nuclear programme, the United States and the European Union have hit Tehran with a new round of sanctions aimed at choking the country's oil trade, along with an embargo on Iranian crude sold into Europe.

Tehran responded with threats to block the strait, through which 30 per cent of global crude is transported.

Iraq, the third-largest Opec producer, last month sent about 1.7 million barrels per day (bpd) of its approximately 2 million bpd export through Basra.

The southern oilfields, which produce the bulk of the country's crude, would be connected to the existing Ceyhan pipeline under the contingency plan. To this effect, a pipeline that connected north and south before its destruction in the first Iraq war is being rebuilt.

"The oil ministry suggested accelerating work to complete building the north strategic pipeline and connect it to the Kirkuk-Ceyhan pipeline to export oil from Basra via Ceyhan port," Mr Dabbagh said.

A third of the 680-kilometre pipeline has already been completed, and the structure will be operational by next year, said a spokesman for the oil ministry.

The government is also considering resurrecting a pipeline connecting Iraq with Syria, and opening talks with Saudi Arabia to ship crude via the Red Sea port of Yanbu.

This month, the first of a series of offshore terminals near Basra became operational, boosting Iraq's export capacity in the south to 2.2 million bpd.

Also this month, Baghdad announced that Iraq's crude production had reached 3 million bpd.

Iraq is not the only country looking to bypass the strait.

The Abu Dhabi Crude Oil Pipeline, designed to deliver the emirate's onshore crude production to the emerging export terminal in Fujairah, is scheduled to become operational by June, Mohammed Al Hamili, the UAE Minister of Energy and the country's Opec governor, said in January. The pipeline, which is owned by International Petroleum Investment Company, was originally scheduled to come into service at the beginning of the year.

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