Iraq exports more, Ecuador exports less and OPEC remains undecided

This section summarizes downstream developments of the previous month. Exploration & Production are covered in 'Upstream Review'.
Crude oil exports from Iraq rose to a post-invasion high of 1.8 mn bpd amid signs of a fall in attacks on oil installations and a lessening of organized violence inside the country. October's total was boosted by a 113,000 bpd increase in exports via Ceyhan, compared with the previous month, to 283,000 bpd. Iraq is nevertheless unable to guarantee an uninterrupted flow of oil through Ceyhan and has withdrawn an offer to supply crude from there on three-month term contracts. The export pipeline was again sabotaged in late November. Iraq has begun the construction of a 200,000 bpd crude pipeline to Abadan in Iran in order to boost exports from the south of the country. Reports persist about large scale smuggling of crude oil out of Iraq.     

Iraqi law opposed, worries about security and a petrol mystery

This section summarizes downstream developments of the previous month. Exploration & Production are covered in 'Upstream Review'.
Iraq's Cabinet has approved a controversial draft law permitting foreign oil investment and allowing regional governments to negotiate directly with foreign companies. Many in Iraq say the law is being imposed on the government by Washington as a way of ensuring that US oil companies have a large role in the production of Iraq's oil. There is also opposition to the idea that regions such as Kurdistan and the Shi'i-dominated south should have an important role in oil policy. Moreover, there is still no firm agreement on how Iraq's oil revenues are to be shared between the various provinces. An important gas export project looks unlikely to go ahead, following Kuwait's decision not to refurbish a pipeline designed to import gas from Iraq's South Rumailah field after Iraq failed to build the infrastructure to export the gas.     

Iraqi violence, Nigerian chaos and some EU proposals

This section summarizes downstream developments of the previous month. Exploration & Production are covered in 'Upstream Review'.
The year opened with no let-up in the violence in Iraq. At the beginning of February, more than 130 were killed by a bomb in a Shi'i district of Baghdad, following a year in which some 35,000 civilians were killed, according to a UN estimate. US President George W Bush announced that extra troops are to be sent to Iraq in an attempt to bring the situation under control. Product shortages inside Iraq were made worse by attacks on downstream installations and the temporary suspension of product deliveries by Turkey. The Turkish government had objected to an Iraqi request for it to liaise with officials in the Kurdish-controlled region of northern Iraq over delivery schedules. Ankara refused to deal with the Kurdish regional authorities on the grounds that it was opposed to all forms of regional autonomy for Kurdish groups. Baghdad meanwhile is trying to re-establish some form of central control over the oil industry in the Kurdish north to prevent it from unilaterally signing contracts with foreign oil companies and to ensure that a proportion of any oil revenues generated in the north is remitted to the central government. Figures released by the Oil Ministry showed that oil exports rose by 7% in 2006, to 1.52 mn bpd, though exports from the northern fields fell by 8%, compared with the previous year, to 38,000 bpd as sabotage to pipelines and other facilities continued. The government of Kuwait has launched an official investigation into allegations of irregularities over the sale of refined products by the Kuwait Petroleum Corporation to the US Army in 2003.     

Violence in Iraq and Nigeria, OPEC cuts output, admits Angola

This section summarizes downstream developments of the previous month. Exploration & Production are covered in 'Upstream Review'.
Iraq ended 2006 with its crude oil exports at zero, its oil industry in need of "urgent attention", according to a report delivered to the US President and Congress, and its domestic security situation spiralling out of control. The execution of former President Saddam Hussain on 30th December failed to pacify the country, as the government appears to have hoped, as more than 2,000 Iraqi civilians died during the month of December and US military casualties passed the 3,000 mark. Crude oil exports ceased as bad weather closed the Persian Gulf terminals of Basrah and Khor al-Amaya. Exports via Ceyhan were already at a standstill, following recent attacks on the pipeline from Kirkuk. The country's main refinery, at Baiji was closed for part of December following threats to workers there and an attack on its main supply pipeline from Kirkuk. The government tried to relieve the resulting shortage of refined products by arranging to import some 6,300 bpd of fuel from Iran. The black-market prices of some refined products were reported by the Arabic newspaper, al-Hayat to have reached record levels. The Oil Ministry estimated that Iraq's oil exports were 1.6 mn bpd during 2006. Iraq has agreed to supply Jordan with 10,000 bpd of crude oil at a discount of around $18/bbl.     

OPEC quotas unchanged, violence continues and countries go green

This section summarizes downstream developments of the previous month. Exploration & Production are covered in 'Upstream Review'.
OPEC maintained its output ceiling at 28 mn bpd at its meeting on 8th March in Vienna, agreeing to review quotas again on 1st June in Venezuela. Venezuela's oil minister said $60/ bbl was a sustainable price for WTI and that OPEC should react when prices fell below that level, having already asked his fellow ministers to cut the OPEC ceiling by 500,000 bpd. Iraq announced that it was standing by plans to raise production capacity to 3 mn bpd by the end of 2006 despite the widespread chaos and violence. It has not been able to produce more than 2 mn bpd on a sustained basis since the US-led invasion three years ago. Production has been close to 1.8 mn bpd in recent weeks. Exports via Basrah are being restricted by a lack of tugs, pipeline leakages, poor equipment and power cuts. The export route to Ceyhan has been closed by repeated acts of sabotage and is unlikely to reopen for at least eight months according to the country's oil ministry.     

Violence in Iraq and Nigeria, high prices in Japan and too much Thai ethanol

This section summarizes downstream developments of the previous month. Exploration & Production are covered in 'Upstream Review'.
Violence in Iraq involved the national oil industry when the Deputy Oil Minister Abd al-Jabbar al-Wagga'a was kidnapped at gunpoint in Baghdad, along with four other oil officials. The gunmen, who were wearing uniforms used by the Iraqi security forces, broke into a compound housing the State Oil Marketing Organization (SOMO). All five were released on 28th August after a fortnight in captivity. The government has told Lukoil that it does not recognize the contract the Russian company signed with the government of Saddam Hussain in 1997 to explore the West Qurnah oilfield, one of Iraq's largest. Lukoil has been informed that it must resubmit its bid to develop the field, where it will face competition from other international companies. Another important oilfield, Majnoon, was shut-in for five days in August after nearby inhabitants blockaded the production site in protest against the lack of jobs there for local people. Majnoon's output - at 40,000 bpd - remains well below the field's capacity as a result of violence in the south of Iraq ( see 'Focus'). Despite the unrest across Iraq and the lack of laws covering foreign investment, the government has recently signed deals covering the building of new pipelines and other developments with Turkey, Iran and Syria.     

Record violence in Iraq, unrest in Nigeria and refineries galore

This section summarizes downstream developments of the previous month. Exploration & Production are covered in 'Upstream Review'.
A United Nations' survey estimated the number of violent deaths in Iraq during October at 3,709: the highest monthly total since the US-led invasion formally ended in May 2003. The 23rd November saw the highest daily total of civilian casualties - over 200 dead - when a Shi'ite quarter of Baghdad known as Sadr City was bombed by terrorists. Four days later, major damage was caused to the Kirkuk oilfield by a mortar attack on the field's main oil-processing centre. The following day, all output from the 300,000 bpd field was reported to have ceased. The field is the principal source of crude supply to the Baiji refinery complex serving Baghdad. The growing violence in Iraq has also prevented the delivery of some 10,000 bpd of crude oil to Jordan under a contract that was signed in August. The oil has to be delivered by road, in the absence of any pipeline between the two countries, but it is now considered too dangerous to operate such a large supply convoy across Iraq (for further developments in Iraq, see 'Focus').     

OPEC cuts production, Iraq cuts exports and China seeks more oil

This section summarizes downstream developments of the previous month. Exploration & Production are covered in 'Upstream Review'.
OPEC ministers agreed to cut crude oil production by 1 mn bpd from 1st January, whilst leaving the group's production ceiling unchanged at 27 mn bpd. Cuts were allocated amongst the seven countries deemed to be overproducing the most ( see Global Energy Review , OPEC, Latest Developments). OPEC's President, Purnomo Yusgiantoro, said OPEC's oil price target should be raised to at least $30 to reflect current dollar weakness. Freight rates fell sharply in the wake of OPEC's decision on output. VLCC rates between the Persian Gulf and Asia went down immediately by 25% and lost a further 60% by the end of the year. Saudi Arabia agreed to cuts of 500,000 bpd. The kingdom meanwhile has added 800,000 bpd to its production capacity with the formal opening of the Qatif and Abu Safah fields, bringing total capacity to 11 mn bpd. The Saudi government stepped up security following renewed threats by al-Qaeda to attack oil installations there. Two car bombs later exploded in Riyadh. In a radical departure from normal trading practice, Saudi Arabia said it would explore the idea of selling oil under long term contracts on a take-or-pay basis. Such arrangements are common in the natural gas industry but rare in the case of oil.     

More price records, Iraq's exports rise and the US probes mogas prices

This section summarizes downstream developments of the previous month. Exploration & Production are covered in 'Upstream Review'.
More oil price records were set as refiners worried about supply and inventory levels and other buyers took advantage of a falling US dollar to stock-up on oil and other commodities. October WTI briefly touched $84.10/bbl on 20th September. The US benchmark gained more than most crudes on fears of disruption to oil production in the US Gulf with the arrival of Hurricane Humberto. Some 1.3 mn bpd of production was temporarily shut-in as a precaution, though in the end there was no damage to offshore installations. North Sea crudes rose sharply the following week, pushing IPE Brent into record territory on 28th September, when the London benchmark rose above $81.00/bbl . The new records came despite a decision by OPEC on 11th September to increase its output by 500,000 bpd between August and November. The November target is 27.25 mn bpd, compared with February 2007's level of 25.80bpd. Iraq and Angola are outside the quota system, though Angola is set to join it in the near future.     

Iraqi violence, Saudi attack and further bombings

This section summarizes downstream developments of the previous month. Exploration & Production are covered in 'Upstream Review'.
Iraq moved closer to all-out civil war following an attack on the Imam Ali al-Hadi mosque in Samarra, one of Shi'i Islam's holiest shrines, on 22nd February. In the days that followed, several hundred Iraqis died in inter-communal violence. Attacks on installations close to the Basrah Oil Terminal were reported. Earlier in the month, the main oil storage facility in Kirkuk was bombed, forcing the Northern Oil Company to shut-in the 0.3 mn bpd field. Oil and electricity supplies in southern Iraq were cut by attacks on installations some 40 miles south of Baghdad. Turkey agreed to resume product exports to Iraq after a deal was agreed on repaying Iraqi debts of $1 bn to Turkish suppliers. An official Australian inquiry into illegal payments made under the UN's oil-for-food programme is to investigate allegations involving two Australian-controlled oil firms.     

Iraqi plans, Nigerian violence and more refineries

This section summarizes downstream developments of the previous month. Exploration & Production are covered in 'Upstream Review'.
Iraq has announced several schemes to raise its production of oil, natural gas and LPG, and to upgrade its refinery system. Work on all these projects, however, continues to be hindered by the high levels of violence, despite the arrival of more US forces in some of the worst-affected areas. The only region where reconstruction and new developments can take place is in the Kurdish north of the country, but here, political tensions between the regional government of Kurdistan and Baghdad are threatening plans to develop new oilfields. Baghdad objects to a series of development deals signed between the Kurdish regional government and various oil and gas companies, one of which has led to the development of a new oilfield and associated infrastructure at Tawke, which is expected on-stream shortly with an output of about 20,000 bpd. Baghdad has drawn-up new rules stating that all such deals should be signed with the central government. Kurdistan's regional government is fighting to retain control of its oil and gas industries.     

Cuts from OPEC, violence in Iraq, more biofuel

This section summarizes downstream developments of the previous month. Exploration & Production are covered in 'Upstream Review'.
OPEC's ministers, meeting in Doha on 19th October, decided to cut their production by 1.2 mn bpd from 1st November. The reduction is based on an output total of 27.5 mn bpd, which represents the production of the ten quota-observing countries in the weeks immediately preceding the Doha meeting. The Kuwaiti Oil Minister subsequently observed that the OPEC-10 were unlikely to be at their 26.3 mn bpd target before the second half of November. Venezuela said its 138,000 bpd cut would be concentrated on foreign joint-ventures operating in the Orinoco heavy oil belt. Crude oil prices fell in the wake of OPEC's announcement, prompting the Saudis to speculate that the group might cut production by a further 500,000 bpd at its meeting in the Nigerian capital, Abuja, on 14th December.     

Markets nervous, problems in Nigeria and troubles with spelling

This section summarizes downstream developments of the previous month. Exploration & Production are covered in 'Upstream Review'.
The capture in late March of 15 British sailors and Royal Marines caused crude oil prices to rise sharply on fears of a worsening situation in the Persian Gulf. WTI rose by $2 a barrel to just over $66. Product markets went up as well as French dock workers went on strike in Marseilles, stranding oil tankers and forcing three nearby refineries to cut their runs. The dockers were protesting against a decision by Gaz de France to use its own staff to handle vessels at a new LNG terminal. The strike was eventually settled after 17 days. There was more trouble for foreign oil companies operating in Nigeria with further violence, kidnappings and damage to installations. Shell, which had some 475,000 bpd shut-in at the beginning of March, was temporarily forced to cut production by a further 190,000 bpd when a pipeline was damaged. It was not immediately clear what had caused the problem. Around 700,000 bpd was reported shut-in across the whole of Nigeria in mid-March, including fields operated by ENI, Total and Chevron, as well as Shell, which has been hardest hit. Attempts to raise production in Nigeria are being hampered by the refusal of some oilfield service companies to work there. A meeting of OPEC ministers on 15th March in Vienna decided not to make any further cuts in production and to continue those previously agreed in Doha and Abuja. Angola attended the meeting for the first time as a full member but was not asked to join the cartel's quota system.     

Explosions in Iraq, UK and Nigeria and more new refineries elsewhere

This section summarizes downstream developments of the previous month. Exploration & Production are covered in 'Upstream Review'.
Iraq's latest round of elections, on 15th December, returned mainly Shi'ite parties, to protests from Sunnis and some secular parties. The country continued to suffer from high levels of violence. Oil installations were bombed, and road-tanker drivers were attacked in what was clearly a move designed to stop the delivery of refined products to Baghdad. The oil minister, Ibrahim Bahr al-Ulum, resigned in protest against a government decision to increase Iraq's heavily subsidized fuel prices. He has been temporarily replaced by the Deputy Prime Minister, Ahmad Chalabi. Opposition to the price rises led to a 10-day strike at Iraq's main refinery at Baiji. Operations continued to be adversely affected after the strike because of sabotage to the 200,000 bpd pipeline bringing crude oil to Baiji from Kirkuk. Sabotage to a pipeline serving the Daura refinery cut production there, and severe gasoline shortages were reported across the Baghdad region. The export pipeline from Kirkuk to Ceyhan was reopened after being idle for most of 2005, but throughputs are nowhere near capacity levels. Exports of crude oil from Basrah were disrupted by power cuts and bad weather.     

Doubts cloud Nigeria's production outlook

Following a series of production setbacks, Nigeria has announced that its output capacity will rise by 0.5 mn bpd between now and the end of the year to 3.0 mn bpd. Production has been hit by unrest in the oil-producing Delta region, sabotage to pipelines, strikes and the theft of substantial volumes of crude oil. The government has recently declared that the security situation has improved and that some 140,000 bpd of production at Chevron's Escravos field-shut in by unrest since March 2003-will be restored before the end of the year. A further 125,000 bpd is due to be added when Shell's deep-water Bonga field is commissioned later this year. Nigeria may nevertheless struggle to hit this year's capacity target and future ones as well.     

More price records, more Nigerian troubles and privatization woes

This section summarizes downstream developments of the previous month. Exploration & Production are covered in 'Upstream Review'.
Crude oil prices rose steadily during July, establishing new records in some instances. Dated BFOE went above $78.90/bbl for the first time, whilst on 1st August, September WTI futures hit a record $78.77/bbl after US crude oil inventories recorded a sharp drop. North Sea markets were affected by the shut-down of a gas pipeline which threatened production of more than 100,000 bpd of NGL. OPEC declined to come to the market's rescue by producing more oil, claiming that the high price levels were caused by geopolitical factors and shortages of refined products rather than insufficient supplies of crude. Demand for oil was boosted in Asia by the shut-down of Japan's largest nuclear power station.     

Iraq goes to polls, China seeks more oil and UK worries about petrol

This section summarizes downstream developments of the previous month. Exploration & Production are covered in 'Upstream Review'.
Following a month in which US and British forces suffered their heaviest daily casualties, the Iraqi people voted in large numbers for a new national assembly ( see 'Focus'). Violence, however, continued after the election and oil installations were reported damaged, including a pipeline linking the Kirkuk oil field to the Baiji refinery and a further line between Baiji and the refinery at Daurah. The export line connecting Kirkuk to the Turkish Mediterranean port of Ceyhan was also hit. Sabotage to electricity installations affected oil pumping stations in the south of the country cutting production and forcing the Iraqis to announce a 10% cut in contract volumes of Basrah Light until the middle of the year. An official investigation into the UN-administered Oil-for-Food Programme concluded that the man in charge, Benon Sevan "repeatedly solicited" oil for a company called Africa Middle East Petroleum. A further report into other allegations of corruption in connection with the programme, which supervised export sales of Iraqi petroleum from 1993 to 2003, is due later this year. Relief at the apparent success of the Iraqi election caused crude oil prices to fall by about $3 a barrel. OPEC ministers did their bit for oil prices by agreeing not to cut output at their meeting on 30th January. Quotas remain unchanged at 27 mn bpd. The organization's target price band of $22-28 a barrel, however, has been suspended. A new one will be discussed in March. Kuwait announced it was to increase security at its oil installations following an attack by armed men in an area close to the emirate's largest refinery, at Mina al-Ahmadi.     

Prices down, supplies down, prices back up

This section summarizes downstream developments of the previous month. Exploration & Production are covered in 'Upstream Review'.
WTI fell below $70/bbl in early June on reports that Iran was considering a proposal from the EU and the UN to resolve the dispute over Tehran's plans to develop nuclear power. Sellers took further encouragement from the news that the Iraqi leader of al-Qaida, Abu Musab al-Zarqawi, had been killed. July WTI futures went down as far as $69.10/bbl. The euphoria proved to be short-lived. Within a short time, Iran announced that it was to resume the enrichment of uranium, whilst in Iraq, there was no sign whatever that the killing of one terrorist leader was going to bring about peace there. During the month of June, an estimated 1,500 people were killed in Baghdad alone. Attacks on road tankers caused the suspension of exports of heavy fuel oil, which is produced to excess by Iraq's refining industry. Lacking anywhere to store the surplus fuel oil, the government ordered what were described as 'large quantities' to be incinerated. The one piece of good news from Iraq was the reopening of the export pipeline from Kirkuk to Ceyhan for the first time since January. Throughput was reported in late June at 325,000 bpd. Even here, though, the situation was not entirely without its troubles. The state marketing company, SOMO, received disappointing bids for the oil it was offering for sale at Ceyhan.     

OPEC abandons quotas, more violence in Nigeria and British give away gas

This section summarizes downstream developments of the previous month. Exploration & Production are covered in 'Upstream Review'.
OPEC ministers meeting in Vienna on 11th September agreed to leave the production ceiling unchanged at 28 mn bpd. The cartel, however, is to move away from formal quotas to a system of adjusting total production to world demand. The change recognizes the fact that many OPEC countries cannot produce their full quota allowances. The new policy is described by OPEC as trying "to ensure that supply and demand (remain) in balance with prices at reasonable levels". "Reasonable levels" were not defined in the communiqué, but most ministers agreed they should be in the region to $60-65/bbl. The oil markets were sceptical and prices fell below $60, reaching a seven-month low at the start of October. Nigeria announced a production cut of 120,000 bpd, though this may be a recognition of the difficulty of producing oil there at present. During September, the country was plagued by further violence in the Niger Delta, including attacks on oil workers, kidnappings and sabotage to oil installations. Oil workers went on strike for two days, threatening further walk-outs. By late September, nearly 875,000 bpd of production was estimated shut-in as a result of the current unrest. Shell said it had suspended plans to repair damaged facilities in the Niger Delta because of the continuing high level of violence.     

Syria struggles to maintain production

Faced with a shortage of foreign investment, Syria is struggling to maintain its oil production around its current level of 400,000 bpd. At the same time, rising domestic consumption means that its exports are being squeezed. The government has high hopes of a revival in the upstream sector this year as drilling begins in a number of areas; but nothing can alter the fact that Syria's oil production is in long term decline.