Chinese construction giant planning to sign up oil pipeline projects in Iraq

China State Construction Engineering Corporation is looking for opportunities in Iraq’s oil industry and believes it could sign at least one contract per year for oil infrastructure in Iraq, Yu Tao, the head of the Middle Eastern division of the Chinese construction giant, told Reuters on Thursday. “We are paying more attention to the oilfields because that is the core business of Iraq,” Yu said.

More oil pipelines in Iraq and out of Iraq could help the country secure some alternative export routes for its crude oil because currently, most of its oil exports have to pass through the Strait of Hormuz, the most important oil chokepoint in the world with daily oil flows averaging 21 million bpd, or the equivalent of about 21 percent of global petroleum liquids consumption.

Currently, the operating pipelines that bypass the Strait of Hormuz are just three—two in Saudi Arabia and one in the UAE—with combined capacity at 6.8 million bpd, not nearly enough to compensate for a disruption of supplies through the Strait of Hormuz should tensions in the Middle East further escalate.

For Iraq, the Persian Gulf and then the Strait of Hormuz, which Iran has repeatedly threatened to block, are the key export routes of more than 3 million bpd of Iraqi crude oil from its southern ports lying on the Persian Gulf.

Cutting off Iraq’s crude oil exports would be disastrous for the country, which relies very much on oil revenues for its budget income, so the Persian Gulf and the Strait of Hormuz are the lifelines of Iraqi state revenues, industry analyst Ruba Husari had told AFP in June. Earlier this week, as tensions continue to flare up in the Middle East, Iraq’s Prime Minister Adel Abdul Mahdi warned that any disruption in the oil exports flowing through the Strait of Hormuz would be a “major obstacle” for Iraq’s economy.  

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