Iraq halted operations at its Basra refinery this weekend due to an overflow of fuel oil in storage tanks, Reuters reported, citing unnamed sources.
The excess inventory accumulated due to a lack of buyers. According to the sources, no fuel oil tankers have docked at Khor Zuhair port since the middle of last week. This led to the suspension of refinery operations, and it remains uncertain when they will resume. The refinery produces about 260,000 barrels of fuel oil daily.
“Operations will resume once ships arrive to load the fuel oil, which is causing the tanks to overflow. This process is managed by the state oil marketer SOMO,” an Iraqi official told Reuters.
The news follows a separate Reuters report linking the Iraqi government and local businesses to a fuel oil smuggling scheme benefiting sanctioned Iran.
Iraq, OPEC‘s second-largest oil producer, has struggled to meet its production targets. In a bid to resolve these challenges, the government has focused on attracting more foreign investment in the oil and gas sector.
Previously, foreign companies operating in Iraq were compensated through technical service contracts, which offered a fixed payment for each barrel of oil produced after covering costs. These contracts provided less financial benefit compared to production-sharing agreements, leaving foreign operators dissatisfied.
Now, Iraq has shifted to a revenue-sharing model. Under the new framework, 25% of the revenue from each barrel will go to Iraq as a royalty, while 75% will be allocated to the operators, allowing them to benefit from rising global oil prices.
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