Q&A: Ali Nazar al-Shatari, deputy director general of SOMO
Iraq is increasing crude sales as sustained higher oil prices have led the OPEC-plus coalition to ease production restrictions — but the country will not surpass its record of nearly 4 million barrels per day (bpd) of exports anytime soon, according to Ali Nazar al-Shatari.
The director of crude and deputy director general of Iraq's State Oil Marketing Company (commonly referred to by its old acronym, SOMO), Shatari says there's plenty of oil, but Iraq can only take advantage of rising production capacity after it finishes replacing decades-old subsea pipelines that carry crude oil to export outlets in the Basra Gulf.
Even more urgently, the Oil Ministry needs to complete long-delayed plans for a storage tank farm at Fao, which would allow the country to improve the quality and consistency of its crude and mitigate the effects of bad weather on tanker loadings — effectively enabling the country to squeeze more value out of each barrel while also increasing overall sales.
SOMO has supported a plan to help finance those upgrades, Shatari said.
In the meantime, despite the infrastructure limitations, SOMO is working to achieve the highest possible prices for Iraqi oil, which provides about 95 percent of state revenues. Last month's oil revenues were the highest since December 2019.
SOMO has gained market insights and technical know-how from recent sales partnership deals with Litasco and others. And, revenues from a portion of Iraq's oil sales have also been flowing into a loan facility with China that Iraq will eventually be able to use for financing $10 billion worth of projects.
SOMO is exploring additional strategic partnerships – in Houston and Antwerp, as examples – with companies that have refining and storage assets to contribute.
The Basra Medium grade, introduced earlier this year as the third Basra grade, now makes up about one-third of the volumes sent to market from the Basra Gulf terminals. This has enabled SOMO to focus on stabilizing the quality of Basra Light, Shatari said.
The Kirkuk grade, however, has a different problem. The independent oil exports by the Kurdistan Regional Government (KRG) are competing with it, in SOMO's view, potentially depressing prices of all the Iraqi oil sold via Ceyhan. And, Shatari said, the KRG's contracts with oil traders contain restrictive terms that effectively prevent the KRG from considering any arrangement through which SOMO might sell crude on its behalf.
Those traders remain blacklisted from doing business with SOMO, Shatari said.
Subscribers to Iraq Oil Report can read the full transcript of the interview below.
If you are not a registered user, you may purchase a subscription or sign up for a free trial.
All sources quoted or referenced spoke to Iraq Oil Report directly and exclusively, unless stated otherwise. Iraq Oil Report typically grants anonymity to sources that can't speak without risking their personal safety or job security. We only publish information from anonymous sources that we independently corroborate and are important to core elements of the story. We do not provide anonymity to sources whose purpose is to further personal or political agendas.
Iraq Oil Report Commitment to Independence
Iraq Oil Report strives to provide thoroughly vetted reporting and fair-minded analysis that enables readers to understand the dynamic events of Iraq. To meet this goal, we always seek to gather first-hand information on the ground, verify facts from multiple angles, and solicit input from every stakeholder involved in a given story.
We view our independence as an integral piece of our competitive advantage. Whereas many media entities in Iraq are owned or heavily influenced by political parties, Iraq Oil Report is wholly owned by several of its employees. In a landscape that is often polarized and politicized, we are able to gather and corroborate information from an unusually wide array of sources because we can speak with all of them in good faith.
To fund this enterprise, Iraq Oil Report depends on revenue from both advertising and subscriptions. Some of our advertisers and subscribers ‐ including companies, governments, and NGOs ‐ are also subjects of our reporting. Consistent with journalistic best practices, Iraq Oil Report maintains a strict firewall that removes business considerations from editorial decision-making. When we are choosing which stories to report and how to write them, our readers always come first.