Basra as 2017's Nigerian Delta?

By Dave Anderson:

I have been of the opinion that onshore and near-shore oil is only exportable from an area with either the consent of the governed or a massively repressive security regime that does not mind killing 5% to 20% of the local population.  Anything in between allows for the formation of non-state actors who can block oil exports relatively cheaply if the local population does not believe that they are getting a fair deal. 

This is not a problem in Norway, or Alaska as the locals believe that they are getting a good deal from either state funding for their Olympic curling team or from annual dividend checks.  This is also not a big deal in Sudan as security forces are willing to crack down hard against any group that could potentially disrupt oil export flows.

This is a problem in Nigeria as most oil production is concentrated in a very small region, the Niger River Delta.  This region has had a successful oil based insurgency that has effectively shut in a quarter to half of all Nigerian oil production for most of the past decade.  The group is called MEND. MEND's demands have been for more oil profits to remain in the region instead of being shipped to the central government and distributed from there.  MEND also makes money through extortion, kidnapping and most crucially stealing and reselling oil on the black-market.  Their coercive ability has been the capacity to kidnap and threaten expat oil workers and blow up oil pipelines that isolate wells from the refining and distribution central nodes. 

Basra looks like it has the right dynamic to replicate the Nigerian Delta quandrary.  

Musings on Iraq reports that the Iraqi goal to produce more oil than Saudia Arabia by 2020 is a joke. However, significant production increases are probable if security remains at the several hundred dead per month due to random car bombings level.  Most of the new production will be geographically concentrated:

First, at the end of March 2010 a panel of experts and oil executives
convened by the Center for Global Energy Studies in London, England said
that it was impossible for Iraq to reach its production goals
within the time it allotted for itself. The conference went through
Iraq�s reserves, the state of its fields, and its export marks, and said
that they did not add up. Looking at two oil fields in Basra, Rumaila
and West Qurna that were auctioned off to foreign companies in 2009, the
group thought that both would only produce half of what the Oil
Ministry hopes to achieve. Rumaila for example, has a production mark of
2.85 million barrels a day within ten years, but the meeting felt that
it would only achieve around 1-2 million barrels a day by that time.
Likewise, West Qurna has a goal of 4.125 million barrels a day, but the
panel estimated that it would only produce around 2 million barrels...

Next, an
energy analyst said that the country was so lacking in
infrastructure and personnel that it would take massive investments to
achieve its goals. The expert noted that almost all of the fields that
are to increase production are concentrated in a very small section of
Basra province, which would strain resources there....

Let's do a quick review of Iraqi export capacity and politics. Iraq exports its oil in three ways.  The most significant is via a pair of off-shore terminals that are fed out of Basra.  Currently those terminals can move at least 2 million barrels per day even if they seldom reach that capacity.  Next the Kirkuk to Ceyhan pipeline can move 600 to 800 thousand barrels of oil per day from northern Iraq to Turkey's Mediterranean port.  Finally, there is small scale export of oil through trucks driving over the border.  Truck driving has declined massively as a means of oil export once the combination of sanctions were lifted and the KtC pipeline was repaired as truck driving was mostly a smuggling method. 

The Kirkuk fields have some growth potential in them and the Kurdish Regional Government is pushing hard to expand those fields with foreign help as fast as they can even if it prompts a political/constitutional crisis with the Baghdad government.  But the major growth in Iraqi oil production is off of a few giant and super-giant fields near Basra which provides a very convenient oil export choke point of its processing and port facilities.

Now let us talk politics.  One of the biggest divides in Iraqi politics is the centralizers versus the federalists/provincial confederations.  A few years ago, I wrote an overview on the major groups in Iraq and touched on this issue:

Team Sunni and the Sadrists factions want a strong central
government that can distribute funding as it sees fit. They
desire a strong system of central government control over the oil
industry. This is because these two groups live
atop of very little current or probable future oil production...

The Kurds, DAWA and SCIRI want a very weak
central government and very strong provincial or provincial federation
government. The majority of their supporters live in the oil producing
regions...

Basra is politically split between the centralizers and the decentralizers.  Dawa's Maliki's State of Law Party won 60% of the seats in Basra in the most recent election.  Maliki is attempting to keep oil revenue from current wells centralized but has indicated a willingness to distribute money locally from new production. 

Let's recap.

Expanded oil production in Iraq will be concentrated in a very narrow geographical area.  There are significant bottle necks that can be turned into choke-points with the application of small amounts of high explosives.  The local population has significant political factions that want to keep the vast majority of at least the new oil production revenue in the area.  Any viable and moderately strong Iraqi central government can not allow most of the revenue to stay in Basra. Baghdad will go broke as the older fields decline. 

This has the makings of serious conflict where a small, determined and modestly well supplied group can replicate MEND's strategy to keep oil revenues local, or at least make oil smuggling very profitable in Basra province.