Iraq is trucking heavy crude across Syria to the port of Baniyas after the Iran war disrupted the Strait of Hormuz, its usual outlet. Qatari group UCC Holding ships 120,000 to 150,000 barrels per day, but truck supply limits further growth.
Hundreds of tanker trucks queue at a depot near Basra to load Iraqi crude oil bound for the Syrian port of Baniyas. The overland desert route had been largely unused for decades.
Hormuz disruption pushes Iraq to a Syrian route
Iraq, OPEC's second-largest producer, has been working to find alternative export routes since the Strait of Hormuz was disrupted by the Iran war. Iraq still exports most of its crude from Gulf terminals, but the Syrian route has become a small yet strategically significant option for heavy crude.
Higher transportation costs have not ended the route's appeal. Two people close to the matter told Reuters the route has regained appeal because years of conflict in Syria have ended.
UCC moves up to 150,000 barrels a day
Since last month, Qatari energy group UCC Holding has been shipping Iraqi crude by truck to Baniyas, said Bassem Abdul Karim, director general of state-run Basra Oil Company. UCC began with 120,000 to 150,000 barrels per day under a contract with state oil marketer SOMO, and volumes depend on truck availability, he added.
UCC has a fleet of 6,000 trucks that it is expanding to 10,000 for the route, according to a person familiar with the deal. Since the deal took effect on October 26, UCC has loaded about 1.6 million barrels, said Luay Jawad, manager of the Tuba storage facility near Basra.
Contract terms and limits on growth
A document reviewed by Reuters showed UCC plans to load between 5 million and 14 million barrels of heavy crude over three months from October 14 at a discount of $38 per barrel. Under the deal, UCC is entitled to about $12 per barrel to cover trucking and related transportation costs through Syria.
However, volumes are unlikely to rise above that level in the near future because of bottlenecks in truck supply and other constraints, the person familiar with the situation said. The oil is loaded onto ships in Baniyas for delivery to Mediterranean refineries in Greece, Italy and Turkey, among others, the person added.
Iraq produced nearly 4.5 million bpd in October, about half a million barrels more than a month earlier, according to secondary sources cited by OPEC in its latest monthly report.
Source: Reuters via Investing.com
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