Without prior warning or explanation, Iraq has announced that the use of the new single-point mooring (SPM) buoy for exporting crude oil from the south will be postponed. In mid-January, Iraq announced the starting of operations at the floating terminal, but the launch was postponed until the end of the month, while the date of actual operations was pushed back until early February, on the grounds that onshore and offshore pipelines needed to be tested, as well as the buoy and its safety. However, after the facility was tested and confirmed to be ready, the opening date was scheduled for January 27, and the Ministry of Oil invited media outlets to cover the event. Meanwhile, the date of actual operation was set for the day before yesterday. The State Oil Marketing Organization in Iraq (SOMO) instructed international oil companies to dispatch their tankers to load up the oil. However, without any warning, the invitation to the media was cancelled without a new date being specified, and the oil companies were told to cancel loading until further notice, forcing the companies to withdraw their tankers anchored in Iraqi territorial waters and cancel their contracts with consumers. The construction of floating terminals is the most important infrastructure project in Iraq over the past three decades. The purpose of the SPM buoy, which has a capacity of exports of around 900 thousand barrels of oil per day, is to accommodate the projected oil export increases in the future. The plan in place includes the construction of five floating terminals, each with a capacity of 900 thousand barrels per day. The goal of completing the construction of the first terminal at this early time in the plan was to accommodate the gradual increase in crude oil exports (around 300 thousand barrels per day) from the southern fields (Rumaila-West Qurna-Al Ahdab). However, exports from this vital project, which has a total cost of approximately 1.3 billion dollars, have yet to start. According to Iraqi oil officials, the reason behind the sudden and inexplicable closure of the floating terminal, while no new date was specified for inauguration and operation despite the completion of the first phase, is due to Iranian pressure on Baghdad to refrain from increasing oil exports at this juncture of the Iranian-Western conflict. It is worth mentioning here that the increase in Iraqi exports at present (around 300 thousand barrels per day) is not very far from the volume of European crude oil imports from Iran (450 thousand barrels of crude per day). The abrupt closure of the SPM buoy coincided with a visit by Iraqi Oil Minister Abdul Karim Luaibi to Tehran. The aim of the visit, according to reports in the Iraqi press shortly before the visit, was to achieve two main things: First, to discuss the negative impact of closing the Strait of Hormuz on Iraqi oil exports (about 90 per cent of Iraqi exports pass through the Strait to the world markets), and second, for the minister, in his capacity as the current president of OPEC, to discuss with the Iranian officials the repercussions of the closure of the Strait on the global oil markets. Nevertheless, the Iranian media only covered the aim of the visit at its end, mentioning only that the Iraqi oil minister had toured Iranian refineries, and discussed with officials in Tehran the possibility of importing Iranian petroleum products into the Iraqi market. So how important is the SPM project? The project, with its five terminals, will help Iraq export five million additional barrels of oil per day through the Arab Gulf upon the conclusion of its development plan by 2017. The project will allow Iraq to export additional supplies that will become available as its fields are developed further. In 2011, Iraq exported around 1.71 million barrels per day of crude oil from its southern oil terminals. However, Iraq did not manage to export the 250 thousand barrels of oil per day from the south, because of the lack of export facilities that can accommodate these additional supplies. Iraq plans to increase production to about 3.4 million barrels per day in 2012, and exports to about 2.6 million barrels per day. This means that Iraq is in dire need to increase its export capacity by building floating terminals, export terminals and storage tanks in order to be able of to export these additional supplies. Otherwise, as was the case in 2011, Iraq would have to reduce its exports despite its increased production, and lose hundreds of billions of dollars in the process. Why is there Iranian pressure on Iraq to refrain from increasing its oil exports? Iraqi oil officials and international oil companies that have been involved in the Iraqi oil sector for years believe that the aim is to block additional oil supplies to Europe when European sanctions against Iran oil exports come into effect. These pressures were put on the Iraqi government despite the fact that Iran is fully aware that there is enough spare productive capacity in Gulf countries to offset the possible shortage of Iranian oil supplies. But the other question that arises here is this: Will Iran exercise the same pressure on Iraq in the future, when it shall increase its output to more than four million barrels per day, compared to the Iranian output of 3.8 million barrels per day? This will mean that Iraq's quota in OPEC will surpass that of Iran, when Iraq will return in the coming few years to the fold of the quota system in OPEC. More importantly, what are the means that Tehran will use to prevent an increase in Iraqi oil exports, especially in the south of the country? Will Iran content itself with political pressures and threats, or will it resort to sabotaging installations through one of the militias it supports and funds? What reaction will the Iraqi government have to such a policy that is pursued by a neighboring country as it tries to disrupt its oil plans? *. Mr. Khadduri is a consultant for MEES Oil & Gas (MeesEnergy)
