Iraq’s largest refinery has come under attack:
The refinery accounts for more than a quarter of the country’s entire refining capacity, all of which goes toward domestic consumption – petrol, cooking oil and fuel for power stations. At the height of the insurgency from 2004 to late 2007, the Baiji refinery was under the control of Sunni militants who used to siphon off crude and petroleum products to finance their operations. Isis has used its control of oilfields in Syria to boost its coffers.
Any lengthy disruption at Baiji risks long lines at the petrol pump and electricity shortages, putting further pressure on the Shia-led government of the prime minister, Nouri al-Maliki.
Ari Phillips checks in on the Iraqi oil intended for export:
“Most of the oil fields in the region are around Basra between Iran and Kuwait, so they aren’t really under threat right now and I doubt they will be,” Peter Juul, a policy analyst specializing in the Middle East at American Progress, told ThinkProgress. “Unless somehow ISIS runs the table and takes over the entire country, which would lead to general chaos — but I don’t think that will happen.”
Rob Wile explains what a disruption of the southern oil fields would mean:
If the conflict migrates to the South, we could be looking at $160 a barrel, [Bank of America Merrill Lynch] says.
Our commodity research team believes that in the unlikely event ISIS invades the South and the entire 2.6 million b/d of southern oil production is lost, oil prices could face $40-50/bbl upside. Further immediate risks to production seem limited under the base case scenario where oil prices remain around $110/bbl. The bulk of Iraq’s oil fields are located in the Shia South, far from the conflict zones.
The Guardian assesses the situation:
Output from Iraq reached an all-time high of 3.5 barrels a day earlier this year and remains at a high level but output is hampered by a lack of export capacity made worse since a northern pipeline was blown up.
The key oilfields in Iraq have largely escaped the real impact of the fighting because they are located in the south of the country. But threats to oil workers of kidnapping, coupled with corruption and equipment shortages, have already hampered their development.
China is already considering its other energy options:
While Iraq has been growing in importance as a source for China’s energy needs, that’s likely to change if the crisis continues much longer. China may instead focus more on tapping oil in Russia, Iran, and Oman, according to Li Li, research and strategy director at ICIS C1 Energy, a Shanghai-based energy information consultancy, English-language China Daily reported.