Iraq Awards Fuel Oil Export Contracts via Syria Route
Iraq has begun exporting fuel oil overland via Syria, marking a major shift in logistics as regional disruptions limit traditional shipping routes.
(Reuters) — Iraq’s state‑owned oil marketer SOMO has finalized contracts to supply about 650,000 metric tons of fuel oil per month from April to June to be trucked overland via Syria, according to a SOMO document seen by Reuters and Iraqi energy officials.
Iraq has not used the land route for decades, but two sources close to the matter said the end of civil war in Syria coupled with the unprecedented disruption caused by the Iran war means it is now the best option, even though it is more costly.
A first convoy of trucks began its journey through Syria on Tuesday, according to two sources close to the matter.
The term contracts awarded to four Iraqi oil traders were concluded after the U.S. and Israel launched attacks on Iran at the end of February, which has led to the effective closure of the Strait of Hormuz.
SOMO did not immediately respond to a request for comment.
Output Reduced and Tanks Are Full
Oil producers, such as Iraq, have reduced output as storage tanks have filled because of the difficulty of shipment.
Three Iraqi energy officials said output from Iraq's main southern oilfields has fallen by about 80% to around 800,000 barrels per day.
None of the sources could be named because they were not authorized to speak publicly.
Before the disruption caused by the Iran war, Iraq exported its fuel oil mainly via the Khor al‑Zubair port on the Gulf, using seaborne routes to reach international markets.
Transporting fuel by road is more expensive and operationally complex than using tankers, but Iraq has little choice.
The SOMO document showed two of the traders will each lift 720,000 metric tons of high sulfur fuel oil over three months, sourced evenly from Iraq’s northern, central and southern refineries, at discounts estimated at between $160 and $170 per ton. A third trader will export 401,000 tons over the same period at a discount of about $160 per ton, while the fourth secured a smaller 90,000 tons contract at a discount of roughly $155 per ton.