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Iraq’s Oil Industry Reaches New Highs in August 2012, But Can They Be Maintained?

By Joel Wing*

In August 2012, Iraq benefited from increased oil exports, while prices rebounded. That resulted from three factors. First, the flow of oil through southern Iraq increased. Second, the Kurds re-started their oil exports, and finally, uncertainty in the Middle East caused petroleum prices to once again surpass the $100 per barrel mark. All together that meant the highest exports in decades, and huge profits. The question is whether those levels are sustainable.

Iraq claimed the highest petroleum exports in 30 years in August 2012. For the month, the country averaged 2.565 million barrels a day in exports. That was up from 2.516 million in July. That was due to increased flows through both the southern and northern pipelines. The Basra line saw an average of 2.252 million barrels, a 36,000 increase from the 2.216 million seen in July. The northern line averaged 313,000 barrels a day, up 19,000 barrels from 294,000 the month before. In total, Iraq exported 79.515 million barrels in August, compared to 77.915 in July. Basra has two new mooring points at the port at Al-Faw that has increased capacity through the south. Because of poor planning however, they can’t operate at the same time, because of a lack of pumping stations and pipelines. Southern oil fields are also producing more than Iraq’s infrastructure can handle. In the north, the Kurdistan Regional Government (KRG) announced that it would restart its exports at the beginning of August. The Kurds claimed they have pumped around 100,000-120,000 barrels a day last month. That probably made up for two attacks by the Kurdistan Workers Party (PKK) on the pipeline that occurred within Turkey, which temporarily halted exports. Overall, the southern oil fields and the port at Basra are still the mainstay of the country’s oil industry, and are largely responsible for it surpassing 2.5 million barrels a day in exports three times this year, all of which were record highs since 2003. Iraq could be pumping far more if it had planned better for the supporting infrastructure necessary for its new mooring points there.

Iraq Oil Exports And Profits 2011-2012

Oil Exports Through Basra 2012

January 1.711 mil/bar/day

February 1.639 mil/bar/day

March 1.917 mil/bar/day

April 2.115 mil/bar/day

May 2.086 mil/bar/day

June 2.085 mil/bar/day

July 2.216 mil/bar/day

August 2.252 mil/bar/day

Oil Exports Through Kirkuk 2012

January 395,000 bar/day

February 375,000 bar/day

March 400,000 bar/day

April 393,000 bar/day

May 366,000 bar/day

June 318,000 bar/day

July 294,000 bar/day

August 313,000 bar/day

Iraq also benefited from continued tensions in the Middle East. Because of fighting in Syria and the dispute with Iran over its nuclear program prices for petroleum returned to the $100 a barrel mark. For August, a barrel of Iraqi petroleum sold for $106. That compared to the previous two months when it went for $96.50 and $90.09. For sixteen of the last twenty months the country’s oil has gone for $100 a barrel or more. That meant in August, Iraq earned $8.442 billion, the third highest amount since 2011. Iraq is the most oil dependent country in the region, and depends upon these revenues to fund its state-run economy. It’s ironic, because the increase in exports and profits only increases this dependency.

Despite the high marks seen in August, Iraq’s oil industry has never been consistent. One month of record highs can be followed by a decline the next. April 2012 for instance, was the first time in years that Iraq exports an average of 2.5 million barrels a day, but then that amount dropped for the next two months. Iraq is also living off of high oil prices that it has little control over. If tensions in the Middle East were to suddenly subside, prices would drop, and Iraq’s increased oil output would actually help bring them down even more. These are dilemmas that many other petroleum states face. Iraq can only continue with its plans, and hope that the regional situation will remain uncertain, so that it can gain from the high oil prices that are the result.

With an MA in International Relations, Joel Wing has been researching and writing about Iraq since 2002. His acclaimed blog, Musings on Iraq, is currently listed by the New York Times and the World Politics Review. In addition, Mr. Wing’s work has been cited by the Center for Strategic and International Studies, the Guardian and the Washington Independent. You may visit his Blog Musings On Iraq at musingsoniraq.blogspot.com