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MABUX ARA LNG Bunker Index
Port LNG$/mton MGO LS$/mton Date
ARA
665.34
+56.24
759.00
-16.00
Apr 17
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Port	LNG$/mton	MGO LS$/mton	Date
ARA	665.34	+56.24	759.00	-16.00	Apr 17

MABUX Global Bunker Index

380HSFO$/mton		VLS FO$/mton		MGO LS$/mton		Date
551.54	+2.78	688.50	-1.60	879.44	-5.50	Apr 19

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MBP INDEX vs DBP INDEX (ICE/NYMEX)

All Indexes in $/mton	380HSFO			VLS FO			MGO LS			Date
All Indexes in $/mton	MBP Index	DBP Index	Diff	MBP Index	DBP Index	Diff	MBP Index	DBP Index	Diff	Date
Rotterdam	476	549	-73	601	651	-50	759	847	-88	Apr 19
Singapore	514	564	-50	645	658	-13	770	856	-86	Apr 19
Fujairah	507	575	-68	645	655	-10	886	904	-18	Apr 19
Houston	482	537	-55	628	672	-44	795	774	+21	Apr 19

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Latest News
- 2024-04-19
  GLOBAL: SHIP IT ZERO CALLS ON SHIPPING INDUSTRY TO PLEDGE FASTER ADOPTION OF E-FUELS
  Ship it Zero has urged cargo owners and carriers to continue to use their influence to expedite the adoption of e-fuels in the maritime sector. As Bunkerspot reported on Wednesday (17 April), the Zero Emission Maritime Buyers Alliance (ZEMBA) announced... Read more
- 2024-04-19
  ASIA PACIFIC: KEYS AZALEA COMPLETES FIRST STS LNG BUNKER DELIVERY IN HIROSHIMA
  The KEYS Azalea completed the first ship-to-ship LNG bunkering operation in western Japan earlier this month, when it delivered fuel to the pure car and truck carrier (PCTC) Daisy Leader at the Port of Hiroshima. The delivery was made on 10 April using... Read more
- 2024-04-19
  ASIA PACIFIC: DNV AWARDS CERTIFICATES FOR FORTESCUE’S DUAL-FUELLED AMMONIA-POWERED GREEN PIONEER
  DNV presented Fortescue with class and statutory certificates for its dual-fuelled ammonia-powered vessel Green Pioneer at a ceremony held during Singapore Maritime Week. In a statement published today (19 April), DNV said that this ‘marked the culmination’... Read more
- 2024-04-19
  GLOBAL: DANISH DECARBONISATION HUB DEBUTS FUEL COST CALCULATOR
  The Mærsk Mc-Kinney Møller Center for Zero Carbon Shipping has developed a Fuel Cost Calculator which allows users to calculate the production costs of low and zero emission fuels and benchmark them against fossil fuels (LNG and low sulphur fuel oil (LSFO)). The... Read more
- 2024-04-19
  Oil prices surge 3% on reports of Israeli strikes on Iran
  Oil prices jumped $3 a barrel on Friday in reaction to reports that Israeli missiles had struck a site in Iran, sparking concerns that Middle East oil supply could be disrupted. The benchmark contracts surged more than $3 then eased slightly. At 0200... Read more Oil prices jumped $3 a barrel on Friday in reaction to reports that Israeli missiles had struck a site in Iran, sparking concerns that Middle East oil supply could be disrupted.
  The benchmark contracts surged more than $3 then eased slightly. At 0200 GMT, Brent futures were up $2.63, or 3%, to $89.74 a barrel. The most active U.S. West Texas Intermediate contract climbed $2.56, or 3.1%, to $84.66 per barrel.
  U.S. news outlet ABC News cited a U.S. official as saying that Israeli missiles had hit a site in Iran.
  Iran's Fars news agency said explosions were heard at an airport in the Iranian city of Isafahan but the cause was not immediately known. Several flights were diverted over Iranian airspace, CNN reported.
  "If these reports turn out to be true, fears over further escalation will only grow, as well as concerns that we are potentially moving closer towards a situation where oil supply risks lead to actual supply disruptions," Warren Patterson, head of commodities strategy at ING, said in a note.
  The reports have sparked worry that Israel has responded to Iran's drone and missile attack of last weekend, Patterson said.
  Last weekend Iran launched hundreds of drones and missiles in a retaliatory strike after a suspected Israeli strike on its embassy compound in Syria. Most of the drones and missiles were downed before reaching Israeli territory, with minimal damage and casualties.
  Investors have been closely monitoring Israel's reaction to the April 13 Iranian drone attacks. The geopolitical risk premium in oil prices had been unwinding this week on the perception that any Israeli retaliation to Iran's attack would be moderated by international pressure.
  In global crude oil supply, Venezuela lost a key U.S. license allowing the OPEC member to export oil to markets globally. The U.S. also announced sanctions on Iran, another OPEC member, targeting its unmanned aerial vehicle after the country's drone strike on Israel last weekend.
  The sanctions on Iran, however, exclude its oil industry. Source: Reuters/Investing.com
- 2024-04-19
  OPEC+ Can Stop An Oil Rally To $100
  Talk of $100 oil returned to the market this week following the Iranian attack against Israel that sparked fears of a widening conflict in the Middle East. Analysts are not ruling out $100 oil in case of further escalation and even $130 oil if a... Read more Talk of $100 oil returned to the market this week following the Iranian attack against Israel that sparked fears of a widening conflict in the Middle East.
  
  Analysts are not ruling out $100 oil in case of further escalation and even $130 oil if a broader conflict disrupts oil flows in the Strait of Hormuz, where around 21 million barrels per day (bpd) of oil pass from the top Middle Eastern exporters en route to global markets. That’s around a fifth of daily global petroleum consumption.
  
  However, the market – while still on edge expecting a possible Israeli response to the Iranian attack – shrugged off the latest flare-up from this weekend, and oil prices eased amid rising U.S. stockpiles and the notion that we may be past peak escalation in the Middle East.
  
  Analysts and traders had also largely priced in an Iranian retaliation for the Israeli hit on an Iranian diplomatic mission in Syria. They also are aware that OPEC+, which is once again firmly back in control of the oil market, is sitting on a spare capacity of about 5 million barrels per day (bpd) of oil production that can be returned gradually in case of severe tightness in markets and a surge in oil prices above $100 per barrel.
  
  OPEC+ Back in the Driver’s Seat
  
  The OPEC+ group could influence oil prices by returning some of the 2 million bpd supply it is currently keeping off the market—unless, of course, the Strait of Hormuz is blocked for oil tanker traffic, which would cripple oil exports of all Middle Eastern producers, including Iran.
  
  A major disruption in the Strait of Hormuz is a ‘low probability’ event, according to analysts.
  
  As U.S. oil supply growth has slowed down, OPEC+ has regained influence over the market and could manage supply and oil prices more aggressively if it chooses to do so.
  Related: White House Aims to Keep Gasoline Prices in Check
  
  “It’s easier for OPEC and OPEC+ to be the 800-pound gorilla in the room, to be strong in this market,” Ann-Louise Hittle, vice president of oil markets at Wood Mackenzie, told The Wall Street Journal.
  
  Still, analysts note that it would take further escalation in the Middle East with a direct threat to oil supply from the region for oil prices to spike to triple digits.
  
  Currently, the market is pricing in a $5 to $10 a barrel war risk premium, and a de-escalation could lead to a pullback in oil prices. Fundamentals, however, point to a tight third quarter with a supply shortfall amid expected rising global oil demand in the summer. Even without the latest Iran-Israel flare-up, prices were expected to be in the high $80s and possibly above $90 a barrel this summer.
  
  When Will OPEC+ Intervene?
  
  Oil prices will continue to include a war risk premium in the short term, but a run-up to $100 oil would only follow another escalation, analysts and investment banks said this week.
  
  “Oil prices are likely to reflect some of these risks with a geopolitical risk premium in the coming months, but we think we’d need to see meaningful escalation to see a pronounced spike to 2022 highs of $125 per barrel from today’s $90 per barrel,” JP Morgan said earlier this week.
  
  According to the bank, the two key risks – a broader conflict and a transit disruption – “appear contained for now.”
  
  “Iran’s own reliance on the Strait of Hormuz also makes its closure seem less likely – with severe consequences for its already struggling economy, as well as for Arab Gulf states broadly and China (Iran’s largest trading partner),” JP Morgan analysts wrote.
  
  Ole Hansen, Head of Commodity Strategy at Saxo Bank, commented that “The risk of a disruption remains limited but in a worst-case scenario some of the short fall can be met by another release of oil from US Strategic Petroleum Reserves or key OPEC producers holding a significant amount of spare capacity, deciding to turn up the taps.”
  
  OPEC+ has a meeting scheduled for early June to decide how to proceed with the current cuts and whether the market situation warrants an easing of the output reductions.
  
  OPEC’s estimated 5-million-bpd spare capacity, most of which is in the Gulf producers Saudi Arabia, the United Arab Emirates (UAE), Iraq, and Kuwait, will deal with any supply disruption in the Middle East except a closure of the Strait of Hormuz, Warren Patterson, Head of Commodities Strategy at ING, wrote in an analysis on Wednesday.
  
  “We believe the likelihood of Israel targeting energy infrastructure is rather small. This would not go down well with allies, given the impact it would have on oil prices,” Patterson said, referring to a possible Israeli response to the Iranian attack this weekend.
  
  “OPEC spare capacity would be able to help the global market in the case of stricter sanctions against Iran or any significant supply disruption from Iran,” the strategist added.
  
  Only a blockade of the Strait of Hormuz would prevent OPEC from bringing some of the spare capacity back to the market, Patterson noted.
  
  But then, if this ‘low probability’ event were to happen, nothing could prevent the prices from spiking to record highs.
  
  OPEC shouldn’t be too happy with triple-digit oil prices. First, oil at $100 a barrel or higher would boost the supply response from the United States and eat further into the cartel’s market share and long-term call on its crude. $100 oil will also trigger demand destruction and a spike in inflation that would push back interest rate cuts further down the line. Source: Oilprice.com
- 2024-04-19
  Arab Nations Act Against Iran-Israel Escalation
  As the world anxiously awaited the outcome of Iran's large-scale attack against Israel, some Arab countries had already taken steps to blunt its impact. When the dust from the April 13 attack settled, the vast majority of the hundreds of drones and... Read more As the world anxiously awaited the outcome of Iran's large-scale attack against Israel, some Arab countries had already taken steps to blunt its impact.
  
  When the dust from the April 13 attack settled, the vast majority of the hundreds of drones and missiles launched by Iran had been shot down -- by Israel, its Western allies, and Jordan, despite its strong opposition to Israel's ongoing war in Gaza.
  
  At least two other Arab states -- Saudi Arabia and the United Arab Emirates (U.A.E.), which have been highly critical of the Gaza war and have joined Iran and other Muslim states in pushing for a cease-fire -- also reportedly played a role in intercepting the Iranian assault by sharing intelligence information.
  
  The actions by the Sunni Arab countries, all of which have tenuous relationships with both Israel and majority-Shi'a Iran, led to speculation that they may have chosen sides. But experts say that their involvement in thwarting Iran's attack does not mark a major shift in their positions -- either for or against Israel or Iran.
  
  Not Taking Sides
  
  "Some went so far as saying that this is an indication that the threat perception among Arab states vis-à-vis Iran is rising, and the equation has changed and the Arab countries may side with Israel against Iran," said Hamidreza Azizi, a fellow at the German Institute for International and Security Affairs. "I don't see the picture like that."
  
  Azizi explained that the Arab countries' contribution, whether shooting down Iranian drones or missiles or providing intelligence, "was more about preventing a war than siding with one side against another."
  
  On X, formerly Twitter, geopolitical and security analyst Michael Horowitz said that while several countries participated, directly or indirectly, in the effort to limit the impact of Iran's attack, Jordan clearly "acted out of self-interest."
  
  Noting that Iranian projectiles had flown over Jordanian airspace during the attack, Horowitz, the director of security consultancy Le Beck International, asked: "What sovereign country would let a third party fly hundreds of missiles and drones over major urban centers without budging?"
  
  Others acted following significant pressure by Israel's key ally, the United States, he said, or out of "fear of a regional escalation." This fear, Horowitz said, alluding to recent steps by Saudi Arabia and others to improve ties with Tehran in recent years, "was the same fear of escalation that has led them to renew communication and broker normalization deals with Iran."
  
  Gaza And Security Above All
  
  Through the smoke of the Israel-Iran showdown, observers who spoke to RFE/RL said, Arab countries sent a message that their desire to maintain regional stability and to see a cease-fire in the Gaza war trumps all.
  
  "I don't see any kind of change in the Arab states' approach toward Israel's war in Gaza," said Azizi. "They are still opposed to it and it seems to be still the main priority of the Arab world and the Muslim world, more broadly speaking."
  
  In fact, Iran's attack -- which Tehran launched in retaliation for a suspected Israeli strike on an Iranian diplomatic compound in Syria on April 1 -- may have been seen by Arab states as an unwelcome distraction from the Gaza situation, according to Azizi.
  
  "What might have irritated the Arab countries is not Iran's strike or retaliation, per se, but the timing of it amid all the efforts for bringing a cease-fire to stop the war," Azizi said. "And also in the sense that, you know, the [Iranian] attack has already shifted international focus from basically pressuring Israel into reconsidering its approach in Gaza to the Iran-Israel confrontation."
  
  The other major considerations in the eyes of the Arab countries, Azizi said, were maintaining regional stability and avoiding a war with Iran.
  
  "They simply don't want further instability in the region. They want to focus on their developmental projects. There are a lot of ambitious initiatives that all states separately or together have been pursuing. So, further instability would be a big challenge to that," Azizi said. "And the last thing they would want to have is a war with Iran itself."
  
  Out Of The Shadows
  
  Iran and Israel have long been engaged in a shadow war that followed a general code -- Iran used its proxies and partners in the so-called "axis of resistance" against Israel to strike against its archenemy, and Israel did not hesitate to hit Iran's militant partners.
  
  This was underscored by the events of October 7, when the Iran-backed and U.S.- and EU-designated terror group Hamas launched a deadly assault on Israel that prompted Israel to invade the Gaza Strip to root out Hamas. The war has left tens of thousands of Palestinians dead and has been accompanied by attacks on Israel by Iranian-backed proxies, as well as strikes by Israel against Iranian-backed militants and even members of the Iranian military in the region.
  
  But all the while, Iran and Israel were careful not to strike each other directly.
  
  That changed with the April 1 aerial strike that targeted the grounds of the Iranian Embassy in Damascus, which killed Iran's top regional commander and six other members of Iran's Islamic Revolutionary Guards Corps (IRGC).
  
  Blaming Israel for the deadly strike that hit a consular annex building, Iran vowed direct retaliation. And while it telegraphed its response 12 days later with advance warnings to regional states, Tehran's launching of hundreds of missiles and drones was a dangerous signal that Iran's "strategic patience" with Israel had run out and it was willing to take Israel on directly.
  
  Speaking about the options Iran had prior to deciding to launch its barrage against Israel on April 13, experts who spoke to RFE/RL noted that it was Israel that took the first step to engage with its Iranian adversary directly.
  
  "I think the one that [Iran] chose was one that signals that they took this seriously. They were trying to remind Israel that Israel might face military consequences if it continued [such] actions," Stephen Walt, a professor of international relations at Harvard University, told RFE/RL's Radio Farda. "But they didn't want to raise the ante to do something even more extensive or more damaging.
  
  "I think the Iranians felt they had to respond, but wanted to do so in a way that didn't provoke a wider war," he added.
  
  Now that Iran and Israel's long-standing conflict has emerged from the shadows, the question is whether it could spiral into a direct war or return to a proxy war.
  
  Both Israel and Iran have suggested that their standoff is not over. Israel has vowed to respond to Iran's attack, without saying how or when. Iran has said that it considers its tit-for-tat with Israel concluded with its unprecedented attack on Israeli territory, while warning that even the "tiniest" retaliation on Iran's territory would bring a "massive and harsh" response.
  
  "We are still in, in a sense, the realm of a shadow war, assuming that Israel does not now respond by hitting Iran back," Walt said. "Assuming it does not now escalate further, then I think we will see a return to the shadow war of the last few months."
  
  Safety In Deniability
  
  Azizi said that is something Iran was comfortable with, even in the event its interests or proxies were hit by Israel, because there was always "some room for deniability" that Iran itself was attacked.
  
  On the other hand, Iran benefited from plausible deniability that it did not direct attacks on Israel carried out by its partners like Hamas, or Huthi rebels in Yemen, or Lebanese Hizballah.
  
  By attacking Israel, Azizi said, "Iran actually abandoned plausible deniability, taking not only responsibility but credit." This, he added, "was an attempt to push Israel toward the old rules of engagement -- to say, let's go back to the gray zone."
  
  None of the actors on the sidelines -- including the United States, which has worked to improve or establish relations between Israel and Arab states, and Russia, which commended Iran's attack on Israel as justified -- wants to see an all-out war.
  
  Those closest to the conflict, the Arab states, have made it clear that they want stability and an end to the Gaza war. Some major players and regional rivals of Iran -- notably Saudi Arabia and the U.A.E. -- have in recent years restored their relations with Tehran in an effort to minimize the threat.
  
  While Arab countries have criticized and, in some cases, helped thwart Iran's attack on Israel, they did not condemn Tehran for its actions. Iran, while sending a vague warning that Jordan could be "the next target," has avoided criticism following months of diplomacy with Arab states over the Gaza war and humanitarian crisis.
  
  "I think both sides (Iran and Arab states) are quite clear that they want to continue going toward this path," Azizi said, even suggesting a possible mediation role for an Arab country in resolving the Iran-Israel crisis.
  
  Source: Oilprice.com
- 2024-04-19
  MABUX: Slight downward trend to continue in the Global bunker market on Apr. 19.
  MABUX World Bunker Index (as index calculated based on current prices for 380 HSFO, VLSFO and MGO) showed a firm downward movement on Apr. 18: 380 HSFO - USD/MT - 548.76 (-4.98) VLSFO - USD/MT – 690.10 (-4.52) MGO - USD/MT – 884.94 (-8.80) As... Read more MABUX World Bunker Index (as index calculated based on current prices for 380 HSFO, VLSFO and MGO) showed a firm downward movement on Apr. 18:
  
  380 HSFO - USD/MT - 548.76 (-4.98)
  VLSFO - USD/MT – 690.10 (-4.52)
  MGO - USD/MT – 884.94 (-8.80)
  
  As of Apr. 18, the MABUX MBP/DBP Index (MDI), which tracks the correlation between market bunker prices (MBP) and the MABUX digital bunker price benchmark (DBP), registered the following price trends across major ports: Rotterdam, Singapore, Fujairah, and Houston.
  
  - HSFO segment: All four selected ports were undercharged, with premiums narrowing by $5 in Rotterdam, $13 in Singapore, $13 in Fujairah, and $9 in Houston. The MDI index in Fujairah remained steady below the $100 mark.
  
  - VLSFO segment: All four ports stayed in the underprice zone, with undercharge margins declining by $10 in Rotterdam, $10 in Singapore, $10 in Fujairah, and $14 in Houston.
  
  - MGO LS segment: Houston continued to be the sole overpriced port, with the ratio rising by $14. The other three ports remained underpriced, with the margins growing further by $4 in Rotterdam, and $9 in Singapore, but dipping by $1 in Fujairah. The MDI index in Rotterdam returned to the $100 mark.
  
  We expect Global bunker indices to maintain a slight downward trend on Apr. 19: 380 HSFO – plus-minus 1-3 USD/MT, VLSFO – plus-minus 1-3 USD/MT, MGO LS – minus 6-12 USD/MT.
  Source: MABUX
- 2024-04-19
  U.S. Shale Oil Production Growth Is Slowing Down
  At the start of this week, following Iran's missile attack on Israel, oil prices inched up. The key word here was "inched". The attack was a first; it came from the fourth-largest oil producer in OPEC, and it targeted a country notorious for its military... Read more At the start of this week, following Iran's missile attack on Israel, oil prices inched up. The key word here was "inched". The attack was a first; it came from the fourth-largest oil producer in OPEC, and it targeted a country notorious for its military prowess. Yet prices only inched up rather than soaring.
  
  One could argue this was because the situation was apparently defused quickly, with neither of the sides willing to engage in an escalation, but this may only be part of the reason for oil prices' lukewarm reaction. The other reason is U.S. shale supply—and that supply may be about to become tighter.
  
  The Energy Information Administration reported this week that the number of drilled but uncompleted wells, the so-called DUCs, had gone up for the first time in a year in March. The increase wasn't stunning or anything, at just nine new drilled but unfracked wells, for a total count of 4,522. But it did suggest drillers are not putting everything they have into production growth—despite WTI prices moving closer to $90 per barrel lately.
  
  This is not exactly unexpected, at least in light of earlier forecasts by the EIA about U.S. oil output trends for the year. The authority said earlier this year that it expected a much more modest pace of growth this year compared to last. It's not the only one predicting a slowdown, either.
  
  Oilfield service veteran David Messler suggested last month that oil production in the shale patch may be nearing its peak and consequent plateau. Messler cited accelerated decline rates for shale wells and the flurry of acquisition deals in the oil space as companies rushed to secure inventory.
  
  Now, the peak that Messler—and others—predict won't materialize this year. But the latest fracklog figures support the EIA's prediction that growth will slow. This will have an immediate and direct bearing on oil prices, just like the output drop in January, due to winter weather, had a bearing on prices, helping them higher.
  
  For now, all looks good, with the EIA forecasting a 16,000-bpd increase in oil production from the shale patch in May. This would bring the total output of the shale plays to 9.86 million barrels daily, with the Permian contributing 11,500 bpd of the overall output increase for the month. So far so good. But earlier this month, Reuters cited industry executives as saying there was little incentive for strong production growth—because of gas prices and also because of higher costs.
  
  All forecasts talking about a continued boom in the shale patch cite things like demand and production process efficiency gains but only the better ones among them acknowledge factors such as costs and could very well be called the new black for U.S. shale: shareholder returns.
  
  These are important factors that need to be mentioned because they drive production planning decisions at least as much as demand expectations, if not more, when you add increasingly stringent, meaning expensive, climate-related regulations. "We need gas prices to get to $2.50 for an overall increase in activity. The Permian customers that have associated gas are seeing awful differentials," one oilfield services CEO told Reuters last week. And it's not just gas prices that are holding drillers back. It's all those additional costs they are facing, from things like methane emission reporting.
  
  Enverus has confirmed an apparent unwillingness in the industry to expand production strongly. "Rig activity levels continue to plateau suggesting that these price levels have not generated an activity response," analyst Alex Ljubojevic said.
  
  Enverus predicts U.S. crude oil output growth at 230,000 bpd this year. The EIA sees it at 260,000 bpd. Both figures are a fraction—although a large one—of the 1-million-bpd output growth in 2023. This brings us back to the situation in the Middle East and oil prices.
  
  At the moment, whatever happens in the Middle East—short of a direct strike on an Iranian oilfield, for instance—has a muted effect on prices. That's in large part because traders are confident about the sufficiency or near sufficiency of global supply—thanks to U.S. shale oil. But shale oil output growth is slowing. And this means the perceived sufficiency of global oil supply is about to change later in the year. Prices will follow.
  
  In a recent opinion piece for the Financial Times, Engine AI adviser and former Citigroup chief equity strategist David Buckland said geopolitical events these days are having a much weaker effect on international prices because of U.S. shale. He is right, which means that when the illusion of unending U.S. shale oil supply shatters, the fallout will be significant. And it seems that this fallout may come sooner than many expect. It might turn out to be quite a nasty surprise. Source: Oilprice.com
- 2024-04-19
  China Tightens Hold on Iraq's Oil with Al-Faw Refinery Nearing Completion
  Back in early 2018 when rumours were rife that then-U.S. President Donald Trump was going to unilaterally withdraw his country from the ‘nuclear deal’ with Iran, China moved to position itself to occupy the vacuum that would be left in Iran and Iraq,... Read more Back in early 2018 when rumours were rife that then-U.S. President Donald Trump was going to unilaterally withdraw his country from the ‘nuclear deal’ with Iran, China moved to position itself to occupy the vacuum that would be left in Iran and Iraq, at the very heart of the Middle East. Beijing knew that Iran continued to wield enormous influence over neighbouring Iraq, and that both together were the biggest oil and gas prize in the entire region, in addition to being at the vanguard of the Shia strand of Islam. In Iran’s case, China picked up the pace of negotiations for its all-encompassing ‘Iran-China 25-Year Comprehensive Cooperation Agreement’ concluded later, as first revealed anywhere in the world in my 3 September 2019 article on the subject and analysed in full in my new book on the new global oil market order.
  
  In Iraq’s case, it did the same for the foundation stone ‘Oil for Reconstruction and Investment’ agreement signed by Baghdad and Beijing in September 2019, which allowed Chinese firms to invest in infrastructure projects in Iraq in exchange for oil. This later became broadened and deepened in the equally all-encompassing ‘Iraq-China Framework Agreement’ of 2021. The announcement last week by the General Company for Ports in Iraq (GCPI) that a consortium of Chinese companies has nearly completed the 300,000-barrels-per-day (bpd) oil refinery at Iraq’s key Faw Port is in line with China’s eventual vision for Iraq as one part of a giant Mesopotamian client state including Iran as well.
  
  Although no details were given by the GCPI as to which Chinese companies are involved in the Al-Faw refinery, in the port city of Basra, a source close to Iraq’s Oil Ministry exclusively told OilPrice.com last week that PowerChina and Norinco International are still the guiding forces behind the development. This makes sense, as these two firms signed the original contract in January 2018 to build the refinery at Al-Faw, which together with its 300,000-bpd capacity would also have a petrochemical plant attached to the development. It also perfectly aligns with Beijing’s broad modus operandi in its expansion strategy across the Middle East to combine commercial ventures with a military presence, as alongside its petroleum and mineral resources exploration and development activities, Norinco is one of China’s foremost defence contractors. One of Norinco’s key oil subsidiaries is Zhenhua Oil, which was the company that on 2 January 2021 made a multi-billion-dollar deal with Iraq’s Federal Government in Baghdad to prepay for four million barrels every month for five years to be delivered to China by Iraq’s State Organization for Marketing of Oil (SOMO). As analysed in depth in my new book on the new global oil market order, it was exactly the same strategy to take over Iraq’s oil industry in the south as Russia had successfully used to take over the industry in the semi-autonomous northern region of Iraqi Kurdistan in 2017. So obviously extraordinarily dangerous to U.S. interests in the Middle East and elsewhere was this deal that Washington eventually succeeded in forcing the Iraqis to suspend it.
  
  This said, other elements of China’s expansion strategy continue unabated, fusing both commercial advances and military ones across southern Iraq. If this strategy sounds familiar, it is precisely the one used by Great Britain in its expansion in the Far East through the East India Company – of which, Chinese President Xi Jinping is a tremendous admirer. After a suitable period had elapsed after the suspension of the omni-toxic Zhenhua Oil prepayment deal, Baghdad approved three potentially far-reaching new infrastructure deals that heavily involved China in the heartland of Iraq. One was for nearly IQD1 trillion (US$700 million) of infrastructure projects in the city of Al-Zubair in the southern Iraq oil hub of Basra. Judging from comments made by the city’s Governor at the time, Abbas Al-Saadi, China’s heavy involvement in Phase 2 of the projects was part of the 2019 ‘Oil for Reconstruction and Investment’ agreement. Another deal was for Chinese companies to build a civilian airport to replace the military base in the capital of the southern oil rich Dhi Qar governorate. The Dhi Qar region includes two of Iraq’s potentially biggest oil fields – Gharraf and Nassiriya – and China said that it intended to complete the airport by the end of 2024. This airport project, it announced, would include the construction of multiple cargo buildings and roads linking the airport to the city’s town centre and separately to other key oil areas in southern Iraq. In the later discussions involved in the 2021 ‘Iraq-China Framework Agreement’, a senior source who works closely with Iraq’s Oil Ministry exclusively told OilPrice.com, it was decided that the airport could be expanded later to be a dual-use civilian and military airport. The military component would be usable by China without first having to consult with whatever Iraqi government was in power at the time, as also analysed in full in my new book on the new global oil market order. The final of the three deals involved Chinese companies building out Al-Sadr City, located near Baghdad, at a cost of between US$7-8 billion, also within the framework of the 2019 ‘oil-for-reconstruction and investment’ agreement.
  
  In this mould, China is finishing the Al-Faw refinery perfectly in time to allow it to complete its strategically vital oil project in the critical Iraqi energy hub of Nasiriyah, at the heart of the some of the country’s biggest oil and gas fields and close to Faw Port’s main export terminal in Basra. According to the Iraq Ministry of Planning, the China Petroleum Pipeline Engineering Company (CPPEC)-led project will act as a storage hub and supply conduit for 3.0-3.5 million barrels of crude oil that will then either go for export out of Basra Port or will be transported to the Al-Faw refinery and through pipelines to other refineries and power plants in central and northern Iraq. It will also act as a logistical command centre for all of China’s extensive oil and gas projects in Iraq and for the build-out of multiple non-oil projects connected to the ‘Iraq-China Framework Agreement’. CPECC is also the very same firm that was awarded a US$308 million engineering, procurement, construction and commissioning contract for the huge Gharraf oilfield. A separate engineering and construction project for Gharraf was also awarded by Baghdad to China’s Zhongman Petroleum and Natural Gas Group. Back in 2015, Zhongman was also awarded a US$526.6 million drilling deal for Iraq’s supergiant West Qurna 2 oilfield. Further emboldened by the effective withdrawal of the U.S. from Iraq at the end of its combat mission in December 2021, the beginning of this year saw PetroChina take over the lead developer role at the neighbouring supergiant West Qurna 1 oilfield from the U.S.’s ExxonMobil. This was followed just a week later by the awarding of a major build-own-operate-transfer contract to a subsidiary of PetroChina to develop the Nahr bin Umar onshore gas field.
  
  Once the Al-Faw refinery has been completed, China will be looking at options for the long-stalled US$11-billion Nebras Petrochemical Project (NPP), following the exit of British supermajor Shell from it in February, according to the Iraq source last week. Although Russia’s Lukoil put together a development proposal for the project before Shell agreed the original memorandum of understanding back in 2012, Beijing now thinks it might be a good fit for its other activities in southern Iraq, particularly as it expands its gas presence as well in the country. China is unlikely to have any issue with Iraq’s ‘commission’ payments – as Western companies have had - although in Nebras’s case these may end up totalling US$4 billion or more. In addition, it remains one of the world’s biggest buyers of ethylene, intended to be one of the major products from Nebras, and developing a world-class petrochemicals sector in Iraq would also give it first rights over other key petrochemicals it needs. Source: Oilprice.com