Iraq launches third offshore pipeline to boost oil exports by two million barrels a day

Iraq started work on its third offshore oil pipeline at the Grand Faw Port in Basra province on Saturday, which could massively boost energy exports when completed.

Officials say the project will increase Iraq’s Gulf export capacity by more than two million barrels a day, but experts and politicians say Iraq needs to establish petrochemical industries and diversify revenue sources to face increasing challenges. 

Deputy Prime Minister for Energy and Oil Minister Hayan Abdul-Ghani said during a ceremony that the project is "one of the most important strategic undertakings" in Iraq’s export network and is designed to modernise the country’s southern oil infrastructure.

The oil ministry says the new marine pipeline will have a design capacity of 2.4 million barrels a day. By connecting Faw’s storage to export terminals, including Basra Oil Terminal and Khor al-Amaya, the project is expected to increase export-related revenues and support Iraq’s national budget significantly.

The project will be completed in three stages: reactivating Khor al-Amaya; linking the Basra terminal; and installing a floating export platform with a 900,000-barrel-a-day capacity. Abdul-Ghani stated that the first phase should be completed within less than two years, with each stage aimed at boosting export volumes and government income.

Abdul Ghani said the project includes several important facilities, such as a 48-inch-diameter pipeline that runs 70 kilometres with 61 kilometres offshore and nine kilometres onshore.

The minister added that the implementation contract was signed on 13 April 2025 between the Basra Oil Company and a consortium made up of Turkey’s Esta and Italy’s Micoperi, both known for their experience in large marine infrastructure projects.

He added that a new ExxonMobil deal includes plans to build overseas oil storage to boost Iraq’s export flexibility and financial returns. The minister said Iraq currently can produce about 5.5 million barrels a day but still follows its OPEC production quota to help stabilise global markets.

Bahrooz Jaafar, head of The Mediterranean Institute for Regional Studies (MIRS), told The New Arab: "Iraq has six ports in Basra for trade and crude oil storage. It mostly uses Umm Qasr, Khor Zubair, and Faw. For years, Iraq has tried to develop the Grand Faw Port with Chinese and South Korean help for $16 billion." 

"The project also includes a large refinery. Since 2024, Iraq has linked these six ports with the United Arab Emirates. The importance of the Grand Faw Port lies in its connection to the Development Road, which will link Basra’s ports to Zakho in the Kurdistan region and, more broadly, the Gulf to Europe via Turkey."

He warned of risks from regional instability: "If war breaks out between Iran and Israel, Iraq’s oil exports will be hindered. Although Iraq has been producing oil for a century, it still imports oil derivatives worth nearly $4 billion. Iraq should invest in petrochemicals and renewable energy instead of just crude exports."

He also said: "Basra has always been strategic for Iraq. The new pipelines will make it more important. But with 35 per cent of Iraq’s people living below the poverty line, the expansion’s benefits may not reach ordinary citizens. Iraq could grow quickly if it avoids shocks, but weak institutions and the lack of the rule of law are major barriers."

Ahmed Haji Rasheed, a former MP and finance committee member, told TNA: "If oil prices fall to $50 a barrel, Iraq will struggle to pay civil servants. The government must diversify income, halt public-sector job growth, and strengthen the private sector." 

He also said that Iraq sells oil at about $64 a barrel, but through petrochemicals, that barrel could earn $1,200. 

"Iraq has not made this shift due to political reasons," he clarified, "The ruling elites have kept the country dependent on its neighbours instead of building self-reliance."

Iraq’s oil ambitions face growing geopolitical and domestic challenges.

Tensions between Iran and Israel have raised fears of a wider conflict that could threaten shipping in the Gulf and disrupt Iraq’s exports. Much of the country’s oil leaves through routes near the Strait of Hormuz, a vital but vulnerable passage.

Inside Iraq, armed groups linked to Iran have launched drone and rocket attacks on oilfields operated by foreign oil companies, increasing security risks for energy projects.

At the same time, a maritime border dispute with Kuwait over the Khor Abdullah waterway has strained relations between the two neighbours, complicating Iraq’s access to Gulf shipping routes.

Economically, Iraq depends on oil for more than 90 per cent of its income, leaving it highly exposed to price changes.

A significant drop in oil prices or renewed conflict could create budget shortfalls, disrupt public services, and delay projects like the Grand Faw expansion and the new pipeline, affecting employment and state-funded development.

Despite these risks, Iraqi officials say the project marks a pivotal advancement in Iraq’s ambitions to revitalise its export infrastructure and secure its status as a leading energy supplier in the Middle East.