Iran-Iraq Oil Pipeline Closer to Construction

03 May 2010 – Iran Daily

Negotiations between Iran and Iraq to build an oil pipeline between the two neighbors may come to fruition within a month.

Iraq is planning to establish a pipeline between the southern Iraqi city of Basra and the Iranian city of Abadan to expand its exports capacity, Econews reported.

The primary agreement was signed in 2005.

Ali Heidari, the trade attaché at the Iranian embassy in Baghdad said Iraqi officials are studying the reformed version of their oil exports.

“We have offered the draft deal to the Iraqi party” Heidari said, adding it is in its final stages and is expected to be finalized in a month.

Iran and Iraq first signed a Memorandum of Understanding back in February 2004 to construct the Basra-Abadan pipeline.

Upon completion the pipeline is expected to carry around 150,000 barrels per day of Iraq’s crude, through a twin pipeline system, to the Iranian refinery in Abadan.

Furthermore, the pipeline is expected to send Iranian refined products back to Basra.

When progress is made, and a tangible asset to the industry finally introduced, it is expected to significantly benefit both parties involved.

For Iraq, the line will aid its inability to meet local demand with domestic crude production.

For Iran, meanwhile, the pipeline will allow the country’s oil industry to benefit from processing Iraq’s cheaper crude, which would in turn mean higher profit margins on petroleum output sales.

Furthermore, using Iraqi crude to provide an increased percentage of the feedstock at Abadan refinery, which has the capacity of 400,000 barrel per day, would allow Iran to export a larger share of its own crude.

At present, the refinery has a production capacity of around 400,000 bpd.

From the Iraqi standpoint, the economic justification for the yet to be built Basra-Abadan pipeline, is reliant upon its own hopes for its refining sector.

Iraq has the world’s third largest crude reserves and it currently produces 2 million barrels per day which is expected to reach 12 million barrels per day.

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