Iraq’s Transport Ministry plans to close the Safwan crossing point on the southern border with Kuwait from 1 June, potentially adding as much as 45 per cent to the cost of transporting freight cargo to the country.
Much of the equipment and construction materials used by international oil companies working in the south of Iraq is transported by road through the border crossing, 47 kilometres southwest of Basra.
The reasons for the closure are not clear, but industry sources warn there will be a knock-on effect on transport costs and delays in bring in equipment and materials for engineering projects. “It means a 35-45 per cent increase in freight costs, so it will have a tremendous impact,” Ramon Sanchez, Iraq country manager for US oil field services firm Halliburton, speaking at MEED’s Iraq Oil & Gas EPC Projects conference in Istanbul.
One possible alternative is to use Iraq’s Umm Qasr port, located on the western side of the Al-Fao peninsula. Competition for space at the port is intense, although it is undergoing an expansion which is expected to increase capacity to 100,000 containers a year by the end of 2012.
“We are looking for viable alternatives, but there is no clear answer so far. It is not just for us, but the whole industry,” says Sanchez. In September, Transport Ministry Hadi al-Ameri threatened to close the crossing to restrict the movement of goods from Kuwait in response to Kuwait’s plans to build a new port in Kuwait. The $1.1bn Mubarak port will be built on Kuwait’s Bubiyan Island and is just a few kilometres from the border with Iraq. It is expected to be finished by 2016 and will be able to handle 1.8 million containers each year.
The Iraqi authorities are concerned that Mubarak port will take away business from their ports and effect fishermen working in the Gulf. Umm Qasr port could lose up to 60 per cent of its business if Kuwait goes ahead with its plans.