US companies signed roughly $60 billion in agreements and partnerships with the Iraqi government Friday, including deals intended to create alternative routes for shipping oil out of the Persian Gulf, according to a report by AP-PTI in The Hindu Business Line. The signing at the US Chamber of Commerce also involved other industries such as healthcare, communications and infrastructure, but the oil-focused agreements aim to reduce dependence on the Strait of Hormuz, through which about a fifth of the world’s oil flows.
Oil price impact and Strait of Hormuz tensions
Iran has sought to close the Strait repeatedly since the US-Iran war began Feb. 28, causing sharp gyrations in oil and gas prices, the report stated. On Friday afternoon, West Texas Intermediate crude rose nearly 5% to $88 a barrel, up from about $67 before the war began. It had topped $110 in early April before falling back after a truce was reached, and has since risen on renewed conflict between the US and Iran.
Deal details and pipeline alternatives
It’s not clear when the oil deals will be able to create viable alternatives to the Strait of Hormuz. Goldman Sachs estimates that pipelines in just one country take at least two and a half years to build, and these pipelines would travel through two or more nations. Thomas Barrack, US Ambassador to Turkey, said the oil pipeline agreements would lead to a program “that will make the Strait of Hormuz an afterthought.”
With the war dramatically reducing oil exports through the Strait of Hormuz, some oil shipments have instead been trucked from Iraq into Syria and shipped to European markets via Syria’s Baniyas port, bypassing the Hormuz route. A key border crossing between northern Iraq and Syria reopened in April after being closed for more than a decade, with officials touting it as an additional route for energy exports. However, the overland route is less efficient and more expensive than shipping exports through the strait. The pipeline project envisioned would allow for exporting a larger volume of oil from Iraq to Syria and Turkey, the report noted.
Goldman Sachs pipeline projections
In a note released earlier this week, analysts at Goldman Sachs estimated that seven different pipelines in the region under development could, by the end of 2028, carry about 60% of the oil currently shipped through the Strait. The pipelines could carry roughly 14 million barrels per day by then, Goldman estimated. Roughly 23 million barrels per day were shipped through Hormuz before the Iran war, according to the report.
| Metric | Value |
|---|---|
| Pre-war Hormuz shipments (bpd) | 23 million |
| Projected pipeline capacity by end-2028 (bpd) | 14 million |
| Share of current Hormuz oil potentially carried by pipelines | 60% |
| Minimum pipeline construction time (single country) | 2.5 years |
Iraq's long-term investment push
The signings followed a meeting between Iraqi Prime Minister Ali Falah al-Zaidi Thursday with executives of Chevron in Houston, at which al-Zaidi urged the US energy company to expand and accelerate its investments in Iraq, the report stated. In a speech Friday, al-Zaidi said Iraq’s economy is seeking long-term investment and partnerships, not merely contractors to carry out projects. Al-Zaidi stressed his government’s commitment to communication, dialogue and cooperation with the U.S. Chamber of Commerce, describing it as “the place where economic decisions are made.”
On Friday, Chevron signed three agreements with the Iraqi government. Jake Spiering, Chevron’s president of corporate business development, said two would focus on boosting oil production, while a third would involve “investing in a pipeline that’s going to create another export route out of Iraq to world markets. This is very important for energy security.” Iraq, which is home to both Iran-backed militias and US bases, found itself in the crosshairs after the US and Israel launched their war on Iran Feb. 28. Syria, one of the few regional countries that has stayed on the sidelines, has promoted itself as a bastion of stability and offered it as an alternative transit route for energy shipments.
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