Oil Production Challenges in Iraq and Libya

Iraq’s Rumaila oilfield, one of the largest in the world, has experienced a significant setback following a fire that broke out last week. The fire, which occurred in a decommissioned storage tank at the fifth gas separation station in northern Rumaila, has resulted in a 300,000 barrels per day (bpd) reduction in its crude oil output. With Iraq’s oil production capacity already heavily reliant on Rumaila, this disruption is a critical blow to the country’s oil production.

The fire was quickly contained, and while there were no serious injuries, two local oil workers suffered minor burns. The Iraqi oil ministry has not yet provided a timeline for the full recovery of production at Rumaila, but Mohammed Al-Najjar, Iraq's National Representative to OPEC, confirmed the temporary cut in output. BP, PetroChina, and Iraq’s Basra Oil Company (BOC) have been collaborating to maximize the field's output, which had seen a 40% increase since 2010.

Rumaila continues to hold an estimated 17 billion barrels of recoverable oil, making it an essential asset to both Iraq and OPEC. BP and PetroChina’s joint venture, Basra Energy Company Limited (BECL), has been crucial to managing and optimizing the field's production. This incident at Rumaila highlights the ongoing vulnerability of Iraq’s oil infrastructure, especially in the face of technical failures.

In related news, protests in Libya have forced the shutdown of two key oil export terminals, Ras Lanuf and Es Sider, with production and export operations being halted as a result. The Oil Crescent Region Movement led the protests, demanding that the headquarters of five energy companies be relocated to the western region of the country, which holds a significant portion of Libya’s oil reserves.

The protests have led to disruptions that could potentially interfere with Libya’s oil output, which is currently at 1.41 million bpd, with an additional 43,700 barrels per day of condensates. Libya’s National Oil Corporation (NOC) had hoped to increase production to 2 million bpd in 2025, but this ambitious target faces significant obstacles due to the volatile political situation and the risk of further blockades by local factions.

While the NOC has not commented on the protests, the group’s future plans include a tender for 22 new exploration blocks in both onshore and offshore fields, which they hope will attract international oil companies despite the political instability. However, this goal may be challenged by ongoing protests and blockades, which are a common occurrence in the country.