Iraq to export 1 million bpd of ‘black oil’ in 2026

• Refining by-product is low-grade
• Move intended to increase income
• Some production smuggled

Iraq plans to export over 1 million barrels per day of what it calls “black oil” within a drive to increase income in the absence of major non-hydrocarbon sources.

“Black oil” in Iraq refers primarily to a low-grade, heavy residual by-product of oil refining, according to analysts, many of whom see it as an environmental hazard.

Due to the limitations of Iraq’s older refineries, the thick and viscous substance is produced in large quantities comprising nearly 50 percent of refined petroleum, experts from an Iraqi economists’ network say in a study.

At its weekly meeting in Baghdad, the cabinet decided to boost exports of black oil to at least 75 percent of production, the prime minister’s information office said.

The cabinet, which met under caretaker prime minister Mohammed Al-Sudani, set the export limit at nearly 1.1 million bpd, the office said.

“The decision to increase black oil exports is intended to maximise national revenues and diversify exports,” the office said.

The country’s black oil exports were minimal last year because a large part of domestic production was supplied to local cement companies and other industries, Nabil Al-Marsoomi, an Iraq energy analyst and author, said.

But some production is smuggled by truck from local refineries to industrial facilities in parts of Iraq and to ports, where it is sent abroad, he told AGBI.

“It is frequently smuggled and traded on the black market, particularly in the northern region,” Al-Marsoomi said.

“The government should intensify efforts to stop smuggling… if it succeeds in this, Iraq could save at least $1 billion per year.”

Al-Marsoomi said Iraq sells black oil locally at heavily subsidised prices of up to ID150,000 ($115) per tonne. Smugglers profit by selling it much more expensively abroad and to local companies needing more than their quotas, he added.

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Iraq’s oil ministry said in 2021 that it had agreed to export black oil to Lebanon to fuel the country’s old power stations. In 2024, Iraqi electricity minister Ziad Fadhil said black oil would be supplied to Iran in exchange for gas.

The cabinet did not specify targeted export markets, but experts say most of the supplies will be marketed in Arab countries with old power plants and industries.

Iraq, Opec’s second-largest oil exporter, relies on crude sales for nearly 90 percent of its income, according to planning ministry spokesman Abdul Zahra Hindawi, who said Baghdad wants to trim that share to 87 percent in 2028.

Crude-price fluctuations have played havoc with its budget, causing a persistent deficit in the past two decades.