Iraq shut down oil production at Rumaila, its largest oil field, and halted crude exports through the Ceyhan pipeline on Tuesday as Iran’s widening regional strikes begin to choke supplies from Opec’s second-largest producer.
The BP-operated Rumaila field, which had been producing about 1.5 million barrels a day, was shut because of a shortage of tankers at Iraq’s southern export terminals, the oil ministry said. It cited the closure of the Strait of Hormuz, which has stopped vessels from calling at Iraqi ports and loading cargoes for international markets.
The halt removes roughly 36 per cent of Iraq’s output. The Opec member pumped 4.157 million bpd in January, according to Opec secondary sources, making it the group’s largest producer after Saudi Arabia. The disruption marks a sharp escalation in supply risks, following Iran’s recent attacks on Gulf energy infrastructure, including facilities in Saudi Arabia and Qatar, that have rattled global markets and pushed Brent crude above $80 a barrel.
Security concerns are also mounting on the ground. “The closure of Rumaila most likely comes from legitimate concerns over the physical security of the oil facilities,” said Tamer Badawi, associate fellow at the London-based Royal United Services Institute.
“A military post in Basrah has already been struck during the war. If that happened, a stray missile or a deliberately directed UAV [unmanned aerial vehicle] can hit Iraqi oil fields as well.”
The shutdown compounds earlier disruptions in northern Iraq. Production at several major fields in the Kurdistan Region had already been halted as a precautionary measure on Monday. Exports through the Ceyhan pipeline to Turkey’s Mediterranean coast were suspended on Tuesday. The pipeline, which has a capacity of around 1.2 million bpd carries crude sourced from Iraq’s Kurdish oil fields to the Turkish port city of Ceyhan.
It also allowed Iraq to bypass Hormuz, which is the main passage for much of the crude exported via its southern terminal at Basrah. The closure effectively blocks northern crude flows to European markets.
With southern exports also hit, these developments will deal a severe blow to Iraq’s oil-dependent economy, where crude sales account for the vast majority of state revenues and pay for a bloated public sector.
“If halting production and exports via Ceyhan and the Gulf persist for a single month, it is likely to lead to social and political upheaval in Iraqi streets, but also the Kurdistan Region,” Mr Badawi said.
Iran-backed armed groups are already fuelling unrest in Iraqi cities, protesting against US and Israeli attacks on Iran. A prolonged suspension of oil revenues and any delay in paying monthly public sector salaries could “turn the country into a powder keg”, Mr Badawi said.
The disruption to Iraqi supply comes as Iran broadens its campaign beyond tanker harassment in the Strait of Hormuz to direct strikes on energy infrastructure across the Gulf, opening a new front that now threatens the world’s largest oil and gas export hubs.
