Iraq began pumping oil on Sunday to the first of five floating terminals in the Gulf in a move that will increase its export capacity by 850,000 barrels per day.
Prime Minister Nuri al-Maliki symbolically opened the valve of a pipeline that runs from Iraq’s southern oil fields to the port of Faw, 535 kilometers (332 miles) south of Baghdad, and then on to the terminal.
Oil ministry spokesman Assem Jihad told AFP that the introduction of the terminal is part of a plan to increase Iraq’s production and export capacity, and said that the second of five planned terminals will hopefully be completed this year.
The eventual goal is for Iraq to be able to export five million barrels per day of oil from the south alone, he said.
Fayyad Hassan Naima, the director general of the Southern Oil Company, told AFP that “the terminal will be ready for exports in a few days.”
The other four floating terminals are due to be operational by the end of 2013. So far the project has cost $1.5 billion.
Oil will be pumped through offshore pipelines in a last test procedure before tankers start loading in a week to 10 days, the head of state-run South Oil Company, Dhiya Jaffar, told Reuters at an opening ceremony for the SPM.
“We expect that exports will increase not less than 250,000 or 300,000 barrels per day,” he said. “The plan is to have the first oil inside the tanker within ten days.”
If the project goes according to plan, exports from Iraq’s southern oilfields will rise to around 1.9 million bpd by March and bring Iraq’s total shipments to 2.3 million bpd, the highest level since the 2003 invasion that ousted Saddam Hussein.
Iraqi officials have said they are targeting 2.6 million bpd by May for total exports.
That will require monthly increase of 100,000 bpd in the south through mid-year when maximum rates of 2.2 million bpd are reached and exports from Iraq's north steady at 400,000 bpd.
The OPEC member has a $1.3 billion plan to expand its export facilities in the south, including two undersea pipelines, one offshore pipeline and four single-point mooring terminals.
Another SPM could be ready in three to four months, Jaffar said.
Iraq’s infrastructure is outdated and lacks the capacity to handle increasing output from foreign companies such as Shell , Exxon and BP, who signed massive development contracts for its Rumaila, West Qurna-1 and Zubair oilfields.
Iraq currently produces about 2.9 million bpd.
Oil sales account for the vast majority of Iraqi government income and around two thirds of gross domestic product. The country exported an average of 2.1 million bpd in 2011, according to Oil Minister Abdelkarim al-Luaybi.
Iraq plans on increasing production and exports this year to 3.4 million bpd and 2.6 million bpd respectively, Luaybi, who was present at Sunday's ceremony, said recently.
Currently about a quarter of Iraqi oil exports come from northern fields and are routed by pipeline to the Turkish Mediterranean port of Ceyhan.