Iraq Lowers Oil Production Expectations

 

ERBIL, Kurdistan Region – Last year, for the first time since 1989, Iraq’s monthly oil production was able to surpass Iran’s production quota inside the Organization of the Petroleum Exporting Countries (OPEC).

Iraqi monthly oil production export hit a high of 2.7 million barrels per day (bpd) in 2012, while Iran’s fell from 2.2 million in 2011 to a low of 1.5 million in 2012. This was largely due to tightened US and international sanctions.

Many thought that Iraq had become a stable oil producing country in the region, but one year after achieving the higher production rates Iraq once again became an unreliable source of oil. Production was again down to 2.3 million bpd by July this year.

This inability to continue sustained production has increased the pressure on the international oil markets and causes problems for Washington, Riyadh and the officials in Baghdad.

The majority of the buyers of Iraqi oil are from the Asian continent. Those countries are complaining about uncertainty in delivering Iraqi oil to their refineries in a timely manner.

Iraq’s OPEC membership has been suspended because of its failure to increase oil production. It cannot regain its place unless it increases output.

The biggest issues that hinder oil production in Iraq are slow progress in repairing or building infrastructure, as well as the lack of oil pipelines and storage facilities.

In June of 2013, Iraq announced a strategic oil plan that would cover the next 17 years. The plan set a target of achieving $6 billion dollars in oil revenues by the year 2030.

It also needs to increase oil output to 3.7 million bpd by 2014, and 12 million bpd by 2017. But the plan says that a whopping $620 billion would need to be invested in the oil industry in order to achieve those targets.

A Middle East economic expert said that in order for this plan to succeed Iraq needs to become an international paradise for investment.  in the world and taking into account Iraq’s current security situation, it is not possible.

In reality the atmosphere in Iraq is not right for large investments by oil majors. The Iraqi Oil Ministry has tried to improve the contract terms to encourage the oil companies to come, and Iraqi Oil Minister Abdelkarim al-Luaybi announced last month that oil and gas contracts would be made more lucrative for investors.

Also, the goals set by the foreign oil companies in the different Iraqi oil fields are being revised and lowered. which indicates the failure of Iraq’s strategic plan.

Last year, Russia’s Lukoil and Italy’s ENI lowered their expectations in terms of oil production goals in Iraq. This week oil giants Shell, BP and ExxonMobil will meet with the Iraqi government in order to revise and lower their oil production goals. Thus, oil production rate in Iraq is constantly decreasing.

Abdulmahdi al-Amidi, director of oil contracts in the Iraqi Oil Ministry, said that BP lowered its output goal for the Rumela fields from 2.85 to 2.1 million bpd. Oil giant Shell lowered its output goal in Majnun from 1.8 to 1.2 million bpd.  At Qurna, ExxonMobil  lowered its goal from 2.854 to 1.8 million bpd.

Although Iraqi officials have lowered production goals from 12 to 9 million bpd in 2017, many experts believe the lower targets also are beyond reach for Iraq.