While flows overland from the north of the country remain shut-in, Iraq is working on a variety of new routes to market

WHAT: As it explores strategic storage options with various partners, Iraq is broadening its export horizons through more deals and plans to target new markets.

WHY: Exports via the country’s Gulf ports have been challenged at various points because of over-reliance on critical infrastructures.

WHAT NEXT: A new pipeline route has been proposed to give Iraq a link to export facilities outside the Strait of Hormuz.

Iraq is continuing with its recent focus on expanding export capabilities and is now exploring a highly ambitious plan to construct a crude oil pipeline to Oman. The move is designed to secure a vital export route that bypasses the Strait of Hormuz and mitigates logistical frailties at its own southern terminals.

As it looks for new ways to export crude, the country is also working to diversity both its crude and product slate and the markets it sells into, with plans under consideration to export to Africa and Latin America.

A new export route?

According to the official Iraqi News Agency (INA), the talks, between Iraq’s State Organization for Marketing of Oil (SOMO) and Oman’s OQ Trading, aim to establish a conduit from the oil-rich Basrah province to an Omani port.

The move would grant Baghdad access to open waters, insulating its most critical revenue stream from geopolitical shocks and operational delays. Ali al-Shatari, SOMO’s general manager, confirmed the rationale behind the discussions.

“Exporting via Oman’s open waters ensures more stable shipments and fewer weather-related disruptions compared to Basrah’s ports,” he said in a statement on September 12, carried by INA. He added the agreement would allow Oman to “leverage its strategic location ... facilitating closer access for Iraqi crude oil exports to Asian customers.”

Diversification drive

Shatari was quoted by the Iraqi News Network as saying that studies are under way to identify opportunities to sell crude into new markets, complementing SOMO’s core focus markets of Europe and Asia.

“Asian markets are witnessing the fastest growth in energy demand; therefore, Iraq is keen to meet this demand and enhance its presence there,” he said. “At the same time, we are careful to maintain balance in our exports to other markets in line with Iraq’s strategic interests.”

China and India tend to be the top buyers of Iraqi crude, with Asia accounting for roughly 60-70% of the country’s exports. However, flows to India have experienced a dip since EU sanctions were imposed on the country’s Russian-backed refiner Nayara Energy in July.

Sales to the US have also dropped in recent months, to around 300,000 bpd or so.

Meanwhile, Greece, Italy and Turkey continue to lead European imports from the country. “Iraq always deals with the European market with interest, but our policy is based on sustainable exports linked to our production capacity, away from ad hoc decisions. We seek a long-term presence in Europe, not just exploiting temporary circumstances.”

Shatari said that studies were looking at opening new sales channels in Africa and Latin America. “Iraq exports to more than 40 countries, which reflects the diversity of our markets and confirms the flexibility of our exports,” he added.

He also noted that new export grades of crude were under consideration for introduction in order to strengthen Iraq’s position in the future.

“There are efforts to add new crude grades that reflect Iraq’s geographical production diversity, giving consumers more options,” he said.

In 2021, SOMO launched the Basrah Medium grade with an API range of 27.9-28° and a sulphur content of 3-3.45%.

At the time, MEOG was told by a trading source that the move to introduce Basrah Medium was an effort to reduce the amount of compensation paid by Baghdad for failing to meet required crude densities. “We’ve seen significant fluctuations in Iraqi crude density and these are costing the authorities hundreds of millions of dollars in compensation. It seems that SOMO is of the thinking: ‘if we get them to pay for a lower crude grade, we avoid the compensation payments’.”

Meanwhile, Shatari also talked up Iraq’s potential as an exporter of LPG and noted that the country is planning to invest in the required infrastructure, to enable “higher export volumes and boosting national revenues.”

Data from OPEC this week showed that Iraq was the group’s second-largest crude producer, behind only Saudi Arabia.

The Kingdom maintained its position as the group’s top producer, pumping 9.709mn bpd in August, with Iraqi flows running at 4.015mn bpd. The UAE ranked third (3.255mn bpd), just ahead of Iran at 3.218mn bpd, with Kuwait (2.492mn bpd) rounding out the top five.

Pipeline prospects

The pipeline plan’s geopolitical urgency has been underscored by recent heightened tensions between Iran and Israel, which prompted renewed threats from Tehran to close the Strait of Hormuz. The chokepoint, through which roughly 20% of the world’s energy supplies transit, represents a significant vulnerability for Baghdad.

Oman has export capacity at the ports of Sohar, Mina Al-Fahal near Muscat, Duqm and the nearby Ras Markaz crude oil terminal.

With Iraq’s key Kirkuk-Ceyhan pipeline in the north of the country closed since 2023, nearly all its crude is exported through its southern Gulf terminals, where ships must transit the crucial chokepoint at the Strait of Hormuz. There have also been operational challenges at the Al-Basrah Oil Terminal (ABOT) and the Khor Al-Amaya Oil Terminal (KAAOT) at various points throughout the past decade, including leakages and single-point moorings having to be taken out of service.

This mooted pipeline project is part of a broader energy and economic partnership between the two nations, formalised during a recent visit to Muscat by an Iraqi delegation led by Prime Minister Mohammed al-Sudani. According to INA, the two sides signed multiple memoranda of understanding, including provisions for Iraq to use Omani storage facilities, such as Ras Markaz, and to collaborate on marketing its crude.

While perhaps at less risk from civil unrest than Iraq’s existing (but moribund) pipelines to Syria and Saudi Arabia, a subsea conduit the 1,000km or so to Oman, presumably via the territorial waters of either Kuwait, Iran, Saudi Arabia or the UAE (unless the plan is to meander through a narrow area of international waters), is highly ambitious.

There have been previous efforts to bridge the Gulf by pipeline, with talk of a gas line from Iran to Oman the furthest developed of these, and as at present, the Dolphin Gas Project – connecting Qatar with UAE and Oman – and the A/B oil pipeline – connecting Saudi Arabia with Bahrain – are the only cross-border, subsea pipelines in the Gulf.