Iraq's SOMO: Gas Deal with Iran will not Affect Domestic Production

Shafaq News/ Iraq's State Oil Marketing Company (SOMO) on Sunday refuted claims suggesting that Iraq's oil production could be impacted by an agreement to pay for Iranian gas imports via crude oil and fuel oil swaps from Baghdad.

In a statement issued to Shafaq News Agency, the company clarified that despite the ongoing suspension of northern oil, Iraq, OPEC's second-largest producer, is grappling with the situation "efficiently".

This follows statements by an anonymous source from SOMO that Iraq's oil production could be adversely affected by the gas import agreement, just as Iraq's north oil continues to be on hold.

On July 11th, Iraq's Prime Minister Mohammad Shia al-Sudani announced at a press conference that Iraq and Iran had signed an oil and fuel swap agreement in exchange for gas and electricity imported from Tehran due to payment difficulties with the sanctions-hit country.

SOMO would handle the sales of crude oil and fuel to companies designated by Iran, al-Sudani confirmed.

As per Standard & Poor's Global, citing a SOMO source in a report reviewed by Shafaq News Agency, even though the execution of the oil and gas swap deal will take time, Iraq is likely to ramp up production from its massive southern fields to compensate for the production loss and the continued suspension of exports via the Turkish Ceyhan port.

The source noted that SOMO is yet to receive details concerning the initiation of the swap deal or the quantity of crude oil and fuel oil to be exported to Iran, or the crude grades to be sold.

The source explained that, alongside the suspension of northern oil exports, the pervasive power cuts in the federal region due to the reduction in Iranian gas supplies have plunged vast areas of the country into darkness, affecting oil production. The production of the gigantic Zubair fields in the south, managed by ENI, and the Rumaila field, managed by British Petroleum, have been impacted by power cuts that began in late June.

The source said that once the Iranian gas supplies are fully restored, it is expected that the power cuts will cease and aid in returning the production in the southern fields to normal levels.

In June, Iraq pumped 3.985 million barrels per day, less than its OPEC+ quota of 4.22 million barrels per day, slightly higher than the 3.955 million barrels per day it pumped in May. This was when Iraq joined several OPEC+ countries in implementing a total voluntary cut of 1.66 million barrels per day, slated to continue until the end of 2024. These voluntary cuts are in addition to the 2 million barrels per day OPEC+ restrictions, which started in November and will continue until the end of 2024.

Three former US officials told Reuters that the natural gas swap between Iran and Iraq, as announced earlier this week by Iraqi Prime Minister Mohammed Shia al-Sudani, could potentially violate the US sanctions imposed on Tehran, unless it issues a waiver.