IEA Sees Iraqi Oil Output Doubling By 2020

on Oct 10, 2012
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**Oil production could reach 8.3 million barrels a day**

Iraq’s oil output can double by the end of the decade, making a major contribution to the stability and security of global energy markets, said the International Energy Agency (IEA) in a special report released on Tuesday (9 October 2012). According to the report ‘Iraq Energy Outlook’, the country’s oil production could reach 6.1 million barrels a day by 2020 and 8.3 million barrels a day by 2035, compared to its current output of just over 3 million barrels a day. The expansion would make Iraq “by far the largest contributor to global supply growth” over the next 20 years, taking the place of Russia as the world’s second-largest oil exporter, the report further estimates.

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**Iraq a Dream for the Energy Industry, Yet It Has Some Obstacles to Overcome**
Fatih Birol, IEA chief economist, described Iraq as a dream for the energy industry, with “high oil reserves, easy geology and low production costs”. “But success is not assured, and failure to achieve the anticipated increase in Iraq’s oil supply would put global oil markets on course for troubled waters,” he cautioned.

!m[Iraq Poised to Become Game-Changer for Global Oil Markets if Production Potential is Met](/uploads/story/550/thumbs/pic1_inline.png)Between late 2008 and early 2010 Iraq awarded a dozen contracts to international oil companies including BP (LON:BP), Lukoil (LON:LKOH), Royal Dutch Shell (LON:RDSA), ExxonMobil (NYSE:XOM) and CNPC of China. Based on these collaboration projects, Iraqi oil officials initially estimated oil production would rise to 12 million barrels a day in 2017. With the IEA’s forecast being half of that implied by Iraq’s targets signed with the foreign oil companies, the Paris-based agency highlighted the risk of production rising more slowly than the country expected. If there are significant delays in the development of Iraq’s reserves, global oil prices could hit $140 a barrel by 2035, almost $15 higher than the IEA’s current central assumption.

According to IEA executive director Maria van der Hoeven, Iraq has the resources to produce the amount of oil the agency’s report estimates, but companies would need to overcome significant obstacles, particularly political impediments and shortcomings in the country’s infrastructure that stand in the way of this goal.
**Infrastructure Investment Needed**

To ensure oil production meets its potential, Iraq needs significant investment in its infrastructure, including increased capacity in oil storage and transportation. Funds will also be needed to fix the country’s dysfunctional electricity network, as prolonged power cuts are still experienced on a daily basis in many parts of the country. According to IEA, the Middle East country must also shift away from its current dependence on oil-fired power plants and increase the use of natural gas if it wants to fulfil its potential as an oil exporter.
Overall, meeting the anticipated levels of oil production over the period to 2035 will require about $530 billion (£313 billion) in energy investment in Iraq, with an annual investment need highest in the current decade. But the country stands to gain much more — almost $5 trillion (£3.1 trillion) in revenues from oil export over the same period, or an average of $200 billion (£125 billion) per year. Revenues of this magnitude could transform Iraq’s troubled economy after decades of war and under-investment and “provide solid foundations for a prosperous country,” said Mr Birol.
**Iraq Beginning to Acknowledge the Challenges **
The Iraq Energy Outlook report has been produced in co-operation with the federal government of Iraq, the regional and provincial governments and officials across many government bodies. The IEA’s chief economist said the watchdog and the Iraqi government had differing views on the outlook for production. Yet in a sign that the Iraqi government is beginning to acknowledge the challenges it faces, the IEA has been invited back to Baghdad to present its conclusions on Wednesday.

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