Iraq Approves New Mechanism to Diversify Crude Oil Exports
Baghdad approves a three-month mechanism allowing experienced domestic and international companies to export crude through multiple outlets.
ERBIL (Kurdistan24) - Iraq is moving to diversify its crude oil export routes after regional conflict and the closure of the Strait of Hormuz disrupted oil shipments from the region and exposed the risks facing maritime energy routes.
On Tuesday, The Iraqi Council of Ministers has approved a new mechanism for exporting crude oil through experienced domestic and international companies and from different outlets, with contracts under the new arrangement set to remain in force for three months beginning September 1.
The move reflects Baghdad’s effort to establish a more diversified and planned system for delivering Iraqi crude to international markets.
Under the decision approved by the Council of Ministers, crude oil exports will be handled through a number of domestic and international companies with experience in the sector and through different export outlets.
The contracts established under the new mechanism will be valid for three months and will take effect on September 1.
The Iraqi government is seeking to broaden the methods available for exporting its crude, with the aim of creating alternative routes capable of maintaining access to international markets.
The push for alternative export routes comes after the Iran war and the closure of the Strait of Hormuz disrupted oil exports in the region and affected energy security along maritime transportation routes.
As part of its plan, Iraq is working to develop alternative export channels, particularly routes through Türkiye and Syria, to reduce its dependence on transportation routes through the Gulf.
The strategy comes as Iraq remains the second-largest oil-producing country in OPEC and relies heavily on crude exports to generate state revenues.
Bloomberg: ADNOC proposes handling Iraqi exports
The latest Iraqi decision follows earlier discussions about alternative ways of moving Iraqi crude amid heightened regional tensions.
According to Bloomberg, the Abu Dhabi National Oil Company (ADNOC) proposed handling Iraq’s crude oil exports through the Strait of Hormuz using ship-to-ship transfers.
Bloomberg reported that ADNOC has used a short-haul shipping strategy to transport Basra crude and other grades to Asian refineries. The proposal emerged amid tensions between the US and Iran and attacks on several vessels in the Strait of Hormuz.
According to the information provided by Bloomberg, ADNOC had recently supplied crude cargoes to Asian buyers and had used the same approach to transport oil from other Middle Eastern producers, including Iraqi crude.
Until then, Vitol Group and TotalEnergies had been among the most prominent shippers of Iraqi oil.
The developments have also prompted Iraq’s State Organization for Marketing of Oil (SOMO) to offer substantial discounts to companies willing to transit the Strait of Hormuz.
According to the Bloomberg report, the discounts reached nearly $30 below the market price per barrel as Iraq sought to encourage buyers and maintain the continuity of its exports despite security risks.
The proposed mechanisms and alternative routes reflect the pressure created by instability around the Strait of Hormuz, prompting oil producers and buyers to adjust their shipping strategies while seeking to maintain the flow of crude to international markets.