Iraq protests have barely affected oil production
BAGHDAD - Iraq has been rocked by two months of anti-government protests that brought down Prime Minister Adel Abdul-Mahdi but its lucrative oil industry has been curiously insulated from the turmoil.
Have protests hurt Iraq’s oil?
In a word, barely.
“All our stations, branches, reserves and transport lines, they’re all working,” Iraqi Oil Minister Thamer al-Ghadban said December 1, hours before parliament agreed on the full cabinet’s resignation.
Since October, sit-ins demanding regime change have intermittently blocked roads in southern Iraq, including near the oil fields of Nasiriya, Garraf and Subba. They have shut access to the Khor al-Zubair port, keeping employees from getting to work in the morning.
However, both the fields and ports had overnight workers who extended their shifts so there was little effect on processing, employees and port officials said.
The closures halted the 30,000 barrels per day (bpd) of heavy crude trucked in from the northern Qayyarah field and exported from Khor al-Zubair, field and port workers said, but the rare barrels transported by road make up a negligible share of the approximately 3.6 million barrels that Iraq ships out daily.
There was little change to the amount of exports, Oil Ministry figures indicated. Iraq reported 3.4 million bpd exported in October and 3.5 million in November.
“It’s dicey but it’s still pretty much under control,” said Ruba Husari of the Iraq Oil Forum.
The three main components of Iraq’s oil industry are huge producing fields, major refineries and the offshore export hubs offshore in Iraqi waters.
“The degree of vulnerability of those (components) to outside interruption is low,” Husari said.
It’s partly by design: the oil fields are self-sustaining islands of production and the vast majority of crude is then transported to export hubs by pipeline, not truck.
“So it cannot be impacted directly by protests taking place on land,” said Noam Raydan, an analyst at ClipperData, which monitors oil tankers.
Refineries are mostly in northern and western areas unaffected by protests.
It’s also because of the response by the Oil Ministry, which prepared reserves of fuel products for domestic consumption, and security forces, which regularly broke up sit-ins outside fields and ports.
While teachers, doctors and engineers employed by the state went on strike at various points over the past two months, oil workers did not join in.
“The staff in the oil sector are the best paid among all ministries in Iraq,” said Husari.
They have little incentive to put their jobs on the line, particularly because competition for those positions or others at state-owned oil companies is fierce.
The closures outside Khor al-Zubair lasted two or three days at a time but they could become “problematic” if extended, said Husari. Iraq has few storage facilities and a build-up of unexported heavy crude or excess fuel oil that cannot reach the port would force a halt in processing.
Since Khor al-Zubair is also used to import gasoline, a refined product Iraq does not produce, long-term disruptions there could lead to shortages at petrol stations or price changes.
Another escalation would be a sit-in inside a key oil field such as Rumaila or West Qurna, or prolonged street closures outside of them.
“If they do that at one major field to the point of forcing a shut-down, then it would hurt tremendously but that’s a long shot,” said Husari, adding that there had been no precedent in Iraq’s recent history of protesters targeting major oil infrastructure.
Iraq relies on its oil exports to fund more than 90% of its state budget, so a halt would cut off the government’s financial resources. It would likely trigger a major downturn in the national economy, which has remained relatively stable.
A serious disruption to exports would affect the global oil market, to which Iraq is a major contributor.
“A big drop — if sustained — would have a significant impact on prices,” Raydan said.
Iraq had pledged to drop its crude output to fall in line with an OPEC-wide trim of 1.2 million bpd designed to revive prices.
“The prevailing wisdom today is on continuing the 1.2 million bpd cut for the coming year — a decision to which Iraq is committed — with an additional cut, perhaps 400,000 bpd,” Ghadban said ahead of an OPEC meeting.