Iraqi oil production from its main southern oilfields has fallen by 70 per cent to just 1.3 million barrels per day as the country is unable to export oil via the Strait of Hormuz due to the Iran war, three industry sources said yesterday.
Production from the fields stood at around 4.3m bpd before the war.
“Crude storage has reached maximum capacity and the remaining output after the major cut will be used to supply the country’s refineries,” said an official with the state-run Basra Oil Company (BOC), which manages production and export operations from the southern fields.
The Strait of Hormuz, a narrow, strategically vital waterway between the Arabian Gulf and the Gulf of Oman, is one of the world’s key oil transit chokepoints, carrying roughly a fifth of global oil and liquefied natural gas flows.
The Opec member’s exports also fell sharply to an average of around 800,000 barrels per day yesterday, with only two tankers loading because vessels cannot move freely through the strait to Iraq’s southern terminals, the source said.
Iraq’s oil exports from the southern oilfields stood at 3.334m barrels per day in February, an oil ministry document showed.
A drop in Iraq’s oil production and exports is set to strain the country’s already fragile finances, as the state relies on crude sales for nearly all public spending and more than 90pc of its income.
“This is the most serious operational threat Iraq has faced in more than 20 years,” a senior Iraqi oil ministry official said.
Meanwhile, the UAE and Kuwait started reducing oil production, as the near-closure of the crucial Strait of Hormuz ripples through energy markets and affects global supply.
Abu Dhabi National Oil Company is “managing offshore production levels to address storage requirements,” the company said in a statement, without giving details. Kuwait Petroleum Corp. said it was lowering production at both its oil fields and refineries after “Iranian threats against safe passage of ships through the Strait of Hormuz.”
Kuwait’s oil cutback started with about 100,000 barrels a day as of early Saturday and was expected to almost triple yesterday, with further gradual reductions depending on storage levels and the status of Hormuz, a person with direct knowledge of the plan said.
The UAE, which pumped more than 3.5m barrels a day as Opec’s third-biggest producer in January, is using export capacity that bypasses the Strait of Hormuz, and its international storage facilities, to ensure supply to global markets. Adnoc operates a 1.5m barrel-a-day pipeline to Fujairah on the UAE’s western coast to avoid the strait. Adnoc said its onshore operations are continuing normally.
Cutbacks by the two Opec members follow a swathe of others in the region. Iraq started holding back production earlier this week as storage tanks started filling up, while Saudi Arabia shut its biggest refinery and Qatar closed the world’s largest liquefied natural gas export plant after drone attacks.
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