Iraq seeks alternatives to Strait of Hormuz over supply disruption fears

Much of the country’s exports are through its southern port of Basra

West Qurna oilfield in Basra. Iraq exports 80 per cent of its crude, largely from the south-eastern city. Lukoil

Iraq is looking at alternative export routes to the Strait of Hormuz over fears of supply disruptions, the Iraqi prime minister said.

"The non-flexibility of our export hubs is part of our fears. Most of our exports are from the south," Adel Abdul Mahdi said. "We are talking of any alternatives," he said.

Iraq, Opec’s second-largest producer, exports most of its crude from its southern terminal at Basra and through the contentious Strait of Hormuz.

The passageway, which lies between large oil producers Saudi Arabia and Iran, allows for the transit of a third of the world's seaborne crude. Iraq's production stands at 4.72 million barrels per day, of which about 80 per cent is destined for export, according to Opec's latest statistics.

Tensions in the Middle East, which escalated following multiple attacks on oil tankers in May and June, have raised concerns about a crisis in the region. Last month, President Donald Trump is said to have called off an attack on targets in Iran after sanctioning it following the downing of a US drone by Tehran. Iran claimed the drone was flying over its airspace.

In another incident involving Iran last week, a Panamanian-flagged tanker carrying crude from the country was seized by British naval forces in Gibraltar for flouting EU sanctions. Tehran has threatened to seize British vessels in retaliation.

Washington has now said it planned to send command vessels and boost surveillance in the Arabian Gulf following attacks on tankers, which it continues to blame on Iran.

The US, which already has its Fifth Fleet stationed in Bahrain is “engaging now with a number of countries” to build up a coalition to man the Strait of Hormuz as well as Bab Al Mandeb, said Marine General Joseph Dunford, chairman of the Joint Chiefs of Staff.

Oil prices, which had slowed at the start of the week, gained 1.67 per cent and was trading at $65.23 per barrel at 12.31pm UAE time on Wednesday amid ongoing tensions in the region as well as tightening of US crude inventory levels.

Iraq has considered transporting its crude from northern Kirkuk to Turkey's southern Ceyhan outlet. Baghdad also plans to raise exports via the pipeline to 100,000 bpd from current averages of 80,000 and 90,000 bpd. But transport of crude via the pipeline has been difficult, with a section of the infrastructure coming under attack earlier this month.

Iraq has also explored options to truck oil to be refined in Iran, but this has been delayed due to security concerns. The countries had agreed to swap up to 60,000 bpd of crude earlier.

Plans are also in the works to export crude from Jordan’s Aqaba, which could transport up to 1 million bpd of crude from the Red Sea port.

Jordan approved the pipeline and has plans for a new refinery at the port, which could potentially turn some of the crude into white products for exports.

An agreement with the Iraqi side on the pipeline was likely to happen "soon" with the construction expected to take three years, Jordan's Energy and Mineral Resources Minister, Hala Zawati, told The National in April.