Iraq delays some oil field developments as production and exports normal during conflict

Iraq, OPEC+s second biggest oil producer, has had to delay development of some oil projects but exports and production have so far remained on schedule, according to an oil ministry source and a report by local news Al Sharqiya News citing the country's oil minister.

Some projects have been delayed because Iranian service companies aren't working, an Iraqi oil ministry source told Platts, part of S&P Global Commodity Insights.

In confirming the oil field development delays, the country's oil minister Hayan Abdul Ghani told Al Sharqiya News that the continued closure of Iraqi airspace due to the conflict has prevented workers from entering the country.

Iraq is also working to find an alternative if the Strait of Hormuz is closed, he said.

Iraq's oil exports and production have not been affected, the oil minister said, according to Al Sharqiya. State oil producer Basrah Oil Co.'s oil exports are "continuing from our oil ports according to the normal rates of our OPEC+ quota," according to a June 21 statement carried on state-run Iraqi News Agency.

Iraq's oil production was 4 million b/d in May, according to the latest Platts OPEC+ Survey by Commodity Insights. Only Saudi Arabia produced more, at 9.14 million b/d.

Iranian natural gas exports to Iraq help generate around 30% of Iraq's power supply, electricity ministry spokesperson Ahmad Moussa has said previously.

There have been no reports of any disruptions to Iran's gas supply to Iraq during the Middle East conflict, but Iran has typically slashed exports to meet its own domestic demand.

In May, Iran cut gas supplies to Iraq, resulting in a loss of 3.5 GW of electrical power supply, and in late May, weeks before Israeli strikes on Iranian gas treatment facilities that temporarily suspended12 million cu m/d of gas production, the Iraqi electricity ministry said it expected the situation to worsen in June.

However, one energy analyst suggested that Iran could continue to supply gas to Iraq, as well as Turkey, to generate badly needed revenue.

Iraq in May imported around 700 million cf/d of gas from Iran, which has remained roughly flat so far in June, Iman Nasseri, the Middle East managing director at FGE Nexant, told Platts. Iraq's power sector fuel usage is estimated at 2.9 Bcf/d of gas and 285,000 b/d of liquids in May, including 162,000 b/d of fuel oil, according to FGE analysis.

A sharp jump is expected in June when liquids use for power generation could climb to 450,000 b/d from 270,000 b/d of fuel oil, assuming flat gas usage month-on-month, according to FGE.

"If gas imports from Iran are completely halted, Iraq will need some 230,000 b/d more liquids to compensate for the shortage," Nasseri said. "However, historically Iraq has never been able to compensate entirely for the gas shortage due to logistics."

Nasseri estimates that halting the gas flow from Iran would likely increase Iraq's liquid burn for power generation by no more than 100,000 b/d, including some 60,000 b/d of fuel oil.

Iraq departure

On 11 June, the U.S. Department of State ordered the departure of non-emergency US government personnel from Iraq and called on US citizens not to travel to Iraq.

"International oil companies are closely monitoring the security situation and prioritizing the safety of their personnel while continuing operations," Myles B. Caggins III, spokesperson for the Association of the Petroleum Industry of Kurdistan, told Platts. The industry group represents several international oil companies in Iraq's northern Kurdistan region.

Pipeline flows have been suspended through the Ceyhan port in Turkey since March 2023, so oil companies in Kurdistan have looked to sell more oil to the local market. A source working at a Kurdistan oil service company said operations were normal.

"But I have heard the companies are making plans for any emergency situations, for example issuing a Turkish visa or residency for the expats to leave to Turkey by car then travel to their country from there."

In fact, Iraq is still planning to increase liquid gas production at Basrah Gas Co. to 8,000 mt/d from 6,000 mt/d in the next few years as part of government efforts to eliminate gas flaring by 2030.