Iraq resists US pressure to reduce Iranian gas imports

Electricity Minister Luay al Khateeb was speaking to reporters on the sidelines of the World Energy Congress in Abu Dhabi. (File/Reuters)
Updated 10 September 2019
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Iraq resists US pressure to reduce Iranian gas imports

  • Iranian oil exports have tumbled since the United States imposed new sanctions on Iran this year
  • Iraq has a US waiver to import Iranian gas, but Washington has been pressing Baghdad to phase them out

ABU DHABI: Iraq will struggle to generate enough electricity unless it continues to use Iranian gas for three to four more years, the electricity minister said on Tuesday, resisting US pressure to stop the imports from its Middle East neighbor.
Iranian oil exports have tumbled since the United States imposed new sanctions on Iran this year, seeking to isolate the Islamic Republic in a row over its nuclear ambitions.
Iraq has a US waiver to import Iranian gas, but Washington has been pressing Baghdad to phase them out.
“At the end of the day it is an open market,” Electricity Minister Luay al Khateeb told reporters on the sidelines of the World Energy Congress in Abu Dhabi. “The issue of electricity is regularly becoming a political affair in Iraq.”
Power cuts in Iraq have often prompted protests against the authorities. Iran supplies enough gas to power 2,500 megawatts (MW), as well as providing Iraq with 1,200 MW in direct power supplies.
The minister said Iraq now had capacity for 18,000 MW, up from 12,000-15,000 MW last year but still below peak demand that could reach about 25,000 MW and was rising every year.
Exports of gas to Iraq and exports of refined products to global markets remain an important source of revenues for Iran.
“We have balanced relations with everyone and people should respect it,” al Khateeb when asked about rising US pressure over its Iranian energy supplies.
The minister said the power sector needed investment worth at least $30 billion to upgrade the grid, which was 50 years old and had lost 25% of its capacity due to Islamic State attacks.
Al Khateeb said Iraq was paying for Iranian gas based on a formula averaging around 11% of the price of benchmark Brent crude oil or about $6 per million British thermal unit (MBTU). This compares to $2-$3 per MBTU in the oversupplied US market.
Iranian gas imports could be reduced if Iraq used more of its gas reserves rather than flaring it, or burning off the associated gas that is produced during oil extraction.
Oil Minister Thamer Ghadhban said four projects were underway to help convert 1.2 billion cubic feet of associated gas into liquids and significantly reduce flaring.


Oil prices climb as Saudi capacity cushions impact

Updated 15 min 30 sec ago

Oil prices climb as Saudi capacity cushions impact

  • Kingdom pledges return to capacity by end of November as Kuwait strengthens security for oil sector

LONDON: Oil prices gained on Thursday, supported by supply risks as the market assesses the fallout from last weekend’s drone attacks on Saudi oil
infrastructure.

Brent crude futures gained $1.78 to $63.80 a barrel, while US West Texas Intermediate crude was up $1.28 at $58.40 a barrel.

The attacks knocked out around half of Saudi Arabia’s crude production and severely limited the country’s spare capacity, a cushion for oil markets in any unplanned outage.

“Global available spare capacity is extremely low at present following the weekend attacks, leaving little room for additional outages, which tends to be price supportive,” UBS oil analyst Giovanni Staunovo said.

Earlier this week Saudi Arabia set out a timeline for a resumption of full operations, saying it had restored supplies to customers at levels prior to the attacks by drawing from its oil inventories.

HIGHLIGHTS

• US to impose more sanctions on Iran.

• Cushing stocks at lowest since October, 2018.

• Global excess capacity at low level.

The Kingdom said it would restore its lost production by the end of this month, and bring its output capacity back to 12 million barrels per day by the end of November.

“These plans suggest Saudi Arabia will have no spare capacity for at least the next two and a half months,” consultancy Energy Aspects said.

Saudi Arabia, the world’s leading oil exporter, has said the crippling attack on its oil sites was “unquestionably sponsored” by Iran.

US President Donald Trump said there were many options short of war with Iran and added that he had ordered the US Treasury to “substantially increase sanctions” on Tehran. Iran has denied involvement in the strikes.

Iran warned President Trump against being dragged into all-out war in the Middle East.

US Secretary of State Mike Pompeo has described the weekend strike as an act of war and has been discussing possible retaliation with Saudi Arabia and other Gulf allies.

Kuwait’s oil sector has raised its security to the highest level as a precaution, a Kuwaiti official said.

Separately, weekly data from the Energy Information Administration on US oil inventories provided a mixed snapshot.

Stockpiles of crude in the US the world’s largest oil producer, rose by 1.1 million barrels last week against analysts’ expectations for a drop of 2.5 million barrels.

However, stocks at Cushing, Oklahoma, the delivery point for benchmark futures, fell to their lowest since October 2018.