Iraq's State Oil Marketing Organization may sell some spot cargoes of Basrah Light this year if the deepwater Khor al-Amaya terminal is re-opened and domestic refiners' needs have been met, the marketer's deputy director general told S&P Global Platts on Jan. 20.
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SOMO excluded Basrah Light, previously its main stream until the creation of Basrah Medium last year, from its 2022 crude export allocations in order to dedicate the grade to local refiners, or to blend it with Basrah Heavy to make more Basrah Medium.
"This is not the end of Basrah Light in terms of exports," Ali al-Shatari said in an interview. "In case Khor al-Amaya terminal comes back we might be able to sell some spot cargoes of Basrah Light and this needs to be evaluated with local consumption. The amount cannot be as big as before in 2021 because the majority of this amount is dedicated to local consumption."
A new subsea pipeline to connect to the Khor al-Amaya oil terminal in the Persian Gulf, which was shut in 2017 because of a faulty pipeline, is currently being built. The re-opening of Khor al-Amaya, which is expected by late this year or early next year, will allow SOMO to sell spot Basrah Light cargoes from the terminal, one of two Iraq has in the Persian Gulf, Shatari said.
Khor al-Amaya terminal can handle vessels that are able to carry as much as 1 million barrels, but the flow rate is not yet set because it depends on the pumping rate and work on the subsea pipeline is not yet finished, Shatari said.
"The subsea line is a new project... because the old one was not commissioning, and flow rates went down dramatically so a vessel of 600,000 barrel capacity or an Aframax could stay there for 8 to 15 days for loading," Shatari said. "So, it wasn't functioning very well and a change of sealine is really needed."
Blending Basrah Light
Iraq stopped exporting Basrah Light this year to dedicate the grade to its mainly old domestic refineries to produce more gasoline and diesel, helping to limit oil product import needs, Shatari said. Current utilization rates at the country's refineries of up to 80% are expected to rise in 2022, which may mean higher consumption of Basrah Light crude.
Iraq exported 901,000 b/d of Basrah Light in December, the lowest of the three Basrah crudes. Up to Jan. 20, Iraq was exporting slightly more than 2 million b/d of Basrah Medium and more than 1 million b/d of Basrah Heavy, according to Shatari.
For 2022, SOMO expects exports of up to 3.28 million b/d of Basrah Medium and Basrah Heavy.
"It is not feasible to have a term contract [for Basrah Light] for three months or even two months so we may do that through some spot cargoes based on total export constraints as agreed by OPEC+," he said. "Some of it might be also used in blending with Basrah Heavy to produce Basrah Medium. It can only happen if there is excess Basrah Light in case there is maintenance at one of our refineries and that refinery cannot take Basrah Light and because of limited storage capacity we may need to blend it with Basrah Heavy."
Basrah Medium and Basrah Heavy exports are "subject to increase" as quotas rise with the progressive unwinding of the OPEC+ agreement, Shatari said. "We may expect bad weather to happen or any other things that may affect those exports [in 2022]," he added.
Iraq, OPEC's second largest producer, has a January quota of 4.281 million b/d, which is up from 4.237 million b/d in December as members of the 23-member coalition continue to ease their production curbs by 400,000 b/d a month.
SOMO introduced Basrah Medium as a new grade in January 2021 after it split it from Basrah Light, previously the biggest oil stream, in order to stabilize and improve its fluctuating API gravity. Basrah Medium has a contractual gravity of 29 API and Basrah Heavy 24 API. Fluctuations in the API of Basrah Medium and Basrah Heavy will not be more than one degree, Shatari said.
Shatari said that all Basrah Medium exports now go through either a dedicated SPM (single point mooring) or the Basrah Oil Terminal and that it is all stored at the same storage farm, "so it will have more stability in its components," adding that this also affords "more flexibility in exports of Basrah Medium."
Last year, Iraq switched exports of Basrah Medium from the SPM to the Basrah Oil Terminal, but this year it has started using the SPM again so it can process higher export volumes of the grade, he said.