Iraq is accelerating plans to build and expand oil pipelines through Turkey and Syria, but the Strait of Hormuz will remain a key route for the country's exports in the coming years due to limited capacity of alternative infrastructure.
Before the regional crisis, Iraq exported about 93 million barrels of oil per month through the Strait of Hormuz. In April, the volume fell to about 10 million barrels.
Baghdad is working on a project for a new oil pipeline through Syria to the Mediterranean port of Baniyas. The project is estimated to cost at least $15 billion and could take about four years to build. It is planned to create a transport hub near Haditha, which will connect the southern and northern oil fields of Iraq with the Syrian coast.
The potential capacity of the facility is estimated at up to 2 million barrels per day.
The restoration of the old Kirkuk-Baniyas oil pipeline is not considered a sufficient solution, since the existing infrastructure is heavily depreciated and damaged. In practice, this requires the construction of a new route.
Companies including Chevron, TI Capital and UCC Holding are participating in the technical and financial studies.
Iraq is also seeking to increase exports through Turkey. In early August, Baghdad and Ankara signed a one-year agreement to continue using the Iraq-Turkey oil pipeline, which reaches the Mediterranean port of Ceyhan.
This remains the only operational land route for the export of Iraqi oil. Iraqi authorities plan to gradually increase its capacity, with the goal of transporting at least 750,000 barrels per day through the system.
Even with such an increase, however, the route will not be able to replace the capacity of the southern terminals around Basra.
Dependence on the Strait of Hormuz remains particularly important for Iraq, as the bulk of the country's oil is extracted in southern fields and exported by tankers from terminals in the Persian Gulf.
In March, restrictions on shipping through Hormuz led to a reduction in Basra Oil Company's production from about 3.3 million to 900,000 barrels per day after international companies experienced difficulties in securing tankers.
Shipping problems continued in August. As of August 17, only six cargo ships had passed through the strait, with no very large crude tankers reported.
The uncertainty surrounding the route has led some buyers to seek supplies outside Hormuz. TotalEnergies’ trading arm, Totsa, has begun offering Iraqi crude for delivery from points outside the strait.
The planned routes through Turkey and Syria could reduce Iraq’s dependence on Hormuz and limit the risk to its oil exports in future regional crises. However, in the short term, the country does not have the infrastructure capacity to replace the sea route through the strait.
As a result, Hormuz will remain a major transportation artery for Iraqi oil, despite Baghdad’s plans to diversify its exports.