The US has supported efforts by Iraq and Syria to revive a crude pipeline between the two countries, a move that could reduce Iran's ability to block oil supplies through the Strait of Hormuz, a State Department official said on Tuesday.
The US expects American companies to play a role in advancing the construction of the Kirkuk-Baniyas pipeline, which has been mostly out of service since it was damaged during the 2003 US-led invasion of Iraq.
Tom Barrack, US special envoy for Syria and Iraq, has held talks with officials from both countries, as well as companies such as Chevron, about reviving the pipeline that runs from Iraq to Syria’s western coast, sources said. While routes for new links are being considered, talks have been focused on rebuilding the pipeline, the sources added.
US President Donald Trump met Iraqi Prime Minister Ali Al Zaidi at the White House on Tuesday and said “massive” new oil deals were to be announced over the next two weeks.
The latest escalation of attacks in the Middle East in the past week highlights the need for long-term alternatives to the strait. The waterway was closed for much of the Iran war, causing the biggest energy supply disruption in history and hurting the economies of countries across the region.
Nations including Iraq and Kuwait are examining whether they can bypass the strait – after the UAE and Saudi Arabia established alternative routes for energy exports – using oil pipelines built years ago.
The Syrian port of Baniyas on the Mediterranean coast, home to the country’s biggest refinery, is an early front-runner to receive Iraqi crude and become an expanded gateway to global markets. Chevron, TotalEnergies, Los Angeles-based TI Capital and Qatar’s UCC Holding have all been part of discussions to expand Syria’s role as an export hub in recent weeks, the sources said.
But building pipelines in Syria would face challenges. The probable routes would run through Iraq’s western Anbar province and eastern Syria, where ISIS cells remain active. Any company investing in such a project would be placing its trust in Syria's fledging government to ensure stability after a protracted and bloody civil war.
Chevron, which signed deals for potential oil projects in Iraq and Syria in recent months, declined to comment. The company has been in talks with Iraq about investing in the Nasiriyah and West Qurna-2 fields since last year. Total, TI Capital and UCC Holding did not respond to requests for comment.
Iraq, the second-biggest producer in Opec before the war began in February, relies heavily on the strait and has been forced to reduce its oil production by 60 per cent since the conflict began. That has put a strain on government finances in a country with a long history of unrest.
Mr Trump backed Mr Al Zaidi to become prime minister in April and the White House hopes he can crack down on Iran-backed militias while opening up his country’s oil sector to American companies.
To help that, Mr Barrack has backed the proposal to revive the 800km Kirkuk-Baniyas pipeline.
Another alternative is installing a pipeline from Basra in southern Iraq to Haditha in the north, with branches extending to Syria, Turkey or Jordan. Baghdad this month authorised state-owned Basra Oil to award a contract to Houston-based engineering company KBR to advise on the idea.
Iraq is keen to attract foreign investment that would reduce reliance on its southern ports. It currently has one major export pipeline that feeds oil from the north to Turkey’s Mediterranean port of Ceyhan.
Iraq’s pipeline prospects appear to have a willing partner in Syrian President Ahmad Al Shara. He was warmly received by Mr Trump on the sidelines of the Nato summit this month, with the US President having pledged to remove terrorism sanctions on the country.
Washington has lifted several other restrictions on Syria over the past year, allowing companies including Chevron, Total and ConocoPhillips to open negotiations about exploring for oil in the country.
“Syria may become a complete destination for reducing risks and diversifying export options,” Syrian Agriculture Minister Basel Al Suwaidan said. “This gives Syria an important role in the next phase.”
But the country's pipelines have a history of shutdowns. First built in the 1950s, the Kirkuk-Baniyas system was halted in the 1970s and again in the early 1980s owing to souring relations between Iraq and Syria.
Its revival could become one of Iraq’s main export routes to the Mediterranean, making it a potential target during escalating regional tensions. Iran-backed militias in Iraq could view the project as an effort to undermine Tehran’s interests and move to disrupt its operations.
“From an investment perspective, Syria’s long-term value lies in its ability to connect regional markets,” said Tarek Naemo, a Syrian-American businessman who previously organised US congressional and business delegations to the country. “That strategic location is attracting attention from investors, although significant work remains before large-scale investment can materialise."
There are also practical challenges. Much of the Kirkuk-Baniyas pipeline has been out of use for decades and would need to be rebuilt, alongside pumping stations and other infrastructure, potentially costing billions of dollars.
French President Emmanuel Macron visited Damascus this month, becoming the first European leader to do so since the downfall of former president Bashar Al Assad. The visit, which took place as bomb blasts were heard in Damascus, was intended to foster regional stability and diversify supply routes between Europe and the Middle East, the French presidential palace said.
“Syria sits at a strategic crossroads in the Middle East,” Patrick Pouyanne, chief executive of French oil company Total, said in Damascus after accompanying Mr Macron. “If, for example, you want to transport Iraqi oil without relying on the Strait of Hormuz, Syria becomes an important transit route. That’s why the country matters.”
With reporting from Bloomberg and Reuters
