Page 7 - DMEA Week 17 2020

DMEA COMMENTARY DMEA
also show that the country’s gas exports rose by 26% last Iranian calendar year (March 21, 2019 to March 20, 2020) and reached 17.5bn cubic metres.
Iraq and Turkey are the only customers of Ira- nian gas, and since Turkish data do not indicate an increase in gas imports from Iran, the growth suggests an equivalent rise in exports to Iraq.
However, both Tehran and Baghdad have confirmed that last winter Iran’s gas exports to Iraq dropped seven times, reaching about 3-4mn cubic metres per day. In the hot season of last year, there was no evidence of an increase in Iran’s gas exports to Iraq, and it is not clear how Iran’s gas exports grew by 26%.
Iran has a daily export contract of 50 mcm (more than 18 bcm per year) of gas with Iraq, but only about half of that gas is delivered for con- sumption at power plants.
“The country can import up to 1,200 MW of electricity per year and up to about 1.2bn stand- ard cubic feet per day during peak usage in the hot summer months, when temperatures in the southern part of the country can soar to 50 Cel- sius. Electricity supply was estimated at 19 GW in 2019 and [is] forecast to reach 20 GW in 2020, while power demand in peak time is around 25 GW,” Luay al-Khateeb told S&P Global Platts.
To provide additional electricity, Iraq imports both electricity directly from Iran and gas that it uses in its power plants, but still faces a shortage during the hot seasons.
According to World Bank data, owing to the lack of gas collection equipment in Iraq’s oilfields, 18 bcm of “associated petroleum gas” produced are burned and wasted annually.
Although assisted by Western companies, it has been years since Iraq embarked on large- scale projects to collect associated gases in its oilfields. Recently, the Iraqi Oil Minister, Thamer Ghadhban, announced that two contracts had been signed last year for the daily collection of 21 mcm of gas from the Halfaya and Ratawi oilfields.
Backed by other projects, Ghadhban said, 28 mcm per day (10 bcm per year) will be added to the country’s gas production. Yet he did not say when the projects would be operational.
Earlier in 2018, Iraq had also promised sim- ilar projects that would end its dependency on Iranian gas. However, none of the promised pro- jects has made much progress so far.
In the meantime, the country’s projects appear to be slowing down, and tumbling oil prices have exerted heavy pressure on Baghdad in recent months.
Based on the International Monetary Fund (IMF) estimates, the Iraqi government needs oil prices to be fixed at above $60 a barrel to avoid a budget deficit, whereas Brent oil prices are around $20 per barrel today.
The IMF forecast shows that the Iraqi gov- ernment will be struggling with a budget deficit equal to 23.3% ($40bn) of its GDP in 2020.™
POLICY
Saudis begin curbing oil output ahead of OPEC+ start date
SAUDI ARABIA
SAUDI Aramco began reducing oil production earlier this week ahead of the May 1 start date for OPEC+ output cuts, according to a Saudi indus- try official familiar with the matter.
Aramco has started to curtail production from about 12mn barrels per day to achieve the agreed level of 8.5 mn bpd, the person said, ask- ing not to be named discussing private informa- tion. The country joins fellow OPEC members Kuwait, Algeria and Nigeria in kicking off cuts early.
The Organisation of Petroleum Exporting Countries (OPEC) and its allies - 23 nations in all - agreed this month to slash global supply by 10% in an effort to balance a market hit by the coronavirus (COVID-19) crisis. Although the cutbacks will amount to an unprecedented
9.7mn bpd, crude prices have continued to slide as worldwide lockdowns wipe out demand.
Aramco is likely to be pumping at its targeted level slightly ahead of May 1, the person said. Rather than an effort to kick-start the output cuts, the gradual reduction reflects the several days that Aramco needs to adjust production safely. The company said it couldn’t immediately respond to a request for comment.
Kuwait said two days ago it had started cut- ting oil output early, as it “felt responsibility to respond to market conditions.” Algeria also said this week that its supply curbs would start imme- diately. Meanwhile, Nigeria said it intended to cut production regardless of the May 1 start date because it has no more storage space available, the Premium Times reported. ™
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