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Chinese Construction Giant Looks To Sign Oil Pipeline Projects In Iraq

China State Construction Engineering Corporation is looking for opportunities in Iraq’s oil industry and believes it could sign at least one contract per year for oil infrastructure in Iraq, Yu Tao, the head of the Middle Eastern division of the Chinese construction giant, told Reuters on Thursday.

“We are paying more attention to the oilfields because that is the core business of Iraq,” Yu said.

The Chinese state construction firm is interested in oil pipeline projects in Iraq, according to the official.

More oil pipelines in Iraq and out of Iraq could help the country secure some alternative export routes for its crude oil because currently, most of its oil exports have to pass through the Strait of Hormuz, the most important oil chokepoint in the world with daily oil flows averaging 21 million bpd, or the equivalent of about 21 percent of global petroleum liquids consumption.

Currently, the operating pipelines that bypass the Strait of Hormuz are just three—two in Saudi Arabia and one in the UAE—with combined capacity at 6.8 million bpd, not nearly enough to compensate for a disruption of supplies through the Strait of Hormuz should tensions in the Middle East further escalate.

For Iraq, the Persian Gulf and then the Strait of Hormuz, which Iran has repeatedly threatened to block, are the key export routes of more than 3 million bpd of Iraqi crude oil from its southern ports lying on the Persian Gulf.

Cutting off Iraq’s crude oil exports would be disastrous for the country, which relies very much on oil revenues for its budget income, so the Persian Gulf and the Strait of Hormuz are the lifelines of Iraqi state revenues, industry analyst Ruba Husari told AFP in June.

Earlier this week, as tensions continue to flare up in the Middle East, Iraq’s Prime Minister Adel Abdul Mahdi warned that any disruption in the oil exports flowing through the Strait of Hormuz would be a “major obstacle” for Iraq’s economy.  

By Tsvetana Paraskova for Oilprice.com

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  • Mamdouh Salameh on July 11 2019 said:
    Iraq’s planned expansion of its crude oil production capacity should go hand in hand with an expansion of its oil export outlets. China being the largest investor in Iraq’s oil industry can help Iraq achieve this goal.

    Iraq is very worried about escalation of tension between the United States and Iran leading to a closure or mining of the Strait of Hormuz through which nearly 19 million barrels per day (mbd) of oil traffic, a fifth of the global oil trade and a third of global LNG supplies, pass every day.

    Oil exports from Iraq, Iran, Kuwait, Bahrain, Qatar (including large volumes of LNG exports), the UAE and Saudi Arabia must pass through the Strait.

    Iraq is now totally dependent on the Strait of Hormuz for its oil exports since the Iraqi-Turkish pipeline known as the ITP transporting Iraqi oil from Kirkuk to Ceyhan on the Turkish coast on the Mediterranean is currently out of action.

    Iraq could expand its oil export infrastructure in three ways. It can reach an accommodation with the regional government of Iraqi Kurdistan for the repair and use of the ITP which has a full capacity of 1.6 mbd. It could also further expand its loading and export terminals on the Gulf.

    But the most important infrastructure would be to extend the Iraq Strategic Pipeline (from Basra to Haditha) with a capacity of 2.25 mbd across Jordan to the port of Aqaba on Jordan’s coast on the Gulf of Aqaba thus bypassing the Strait of Hormuz altogether.

    Dr Mamdouh G Salameh
    International Oil Economist
    Visiting Professor of Energy Economics at ESCP Europe Business School, London

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