Can Iraq get rid of Saudi Arabia as the largest oil producer?

Iraq’s Oil Minister, Ihsan Abdul-Jabbar, said last week that the country aims to increase its crude oil production to 6 million barrels per day by the end of 2027. This type of statement, with little change in quantity or year in each variable, was presented by many From oil ministers on several occasions, but with oil prices still at supportive levels for producers, this latest statement raises three key questions: Can it be done; More can be done; Is it done? The answer to the first question is yes. It has also been deeply analyzed in My new book on global oil marketsIraq remains – more than Iran – the largest and relatively underdeveloped oil frontier in the world. Officially, according to Energy Information Administration (EIA) figures, Iraq has an estimated 145 billion barrels of proven crude oil reserves (nearly 18 percent of the Middle East’s total, and about 9 percent of the world’s reserves). It is currently producing about 4.1 – 4.2 million barrels per day, compared to OPEC’s quota in April of 4.414 million barrels per day, and its quota is scheduled to increase to 4.5 million barrels per day in June.

Although Iraq is currently only able to produce about 4.1-4.3 million barrels per day, this shortage is largely due to the outage of fields in the south for maintenance reasons, most notably the 400,000 barrels per day of West Qurna 2 field stopped for 12 A day of maintenance, and to its continuation. Develop the ongoing work on export infrastructure. From 2015 to 2020, Iraq’s crude oil production was repeatedly recoded at more than 4.5 million barrels per day, and its highest monthly production was 4.83 million barrels per day in December 2016, according to OPEC figures.

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In the relatively short term, certainly before the end of 2027, there certainly appears to be scope to increase crude oil production from several fields in Iraq – with an emphasis on those in the south, given the continuing difficulties in the semi-autonomous Kurdistan region in the north. – Without much in the way of the costly and time-consuming construction of the country’s essential oil infrastructure. Last August, Iraq approved plans to enable BP to separate its operations in the giant Rumaila oil field by creating the Basra Energy Company Limited, which will hold BP’s stake in the site and be jointly owned by the China National Petroleum Corporation (CNPC).

This is expected to unlock a major new line of financing for the field, which has been producing about 1.4-1.5 million barrels per day for many years, since its discovery in 1953. The plateau target is 2.1 million barrels per day. As with the vast majority of Iraqi oil fields in the north and south, the cost of raising oil remains the lowest in the world at around $2-3 per barrel, on par with Saudi Arabia.

Recent increases in crude oil production at Rumaila can be attributed to improvements by BP and CNPC, including the renovation of the Qarm Ali water treatment plant. This is now capable of treating up to 1.3-1.4 million barrels per day of river water, allowing for greater extraction of oil from the field’s Mushrif reservoir (three times the amount extracted in 2010). According to industry figures, the Rumaila field needs about 1.4 barrels of water for every barrel of oil produced from the north of the field, while the Mushrif Formation in the south requires much higher water pumping rates to support production.

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It has also supported the Qarmat facility and will continue to support increases in crude oil production at the annex Zubair field, which is primarily operated by Eni (plus Kogas and Iraqi partners), with about 14 percent of the water going from the Qarmat Ali water treatment plant. to Zubair. With an initial target of 201,000 bpd, Zubair is now producing around 360,000 bpd, and is set to receive another boost from the construction of a 380 MW power plant. These developments are likely to increase oil production to around 600,000 b/d, and there is another scope for significant increases in production, given Zubair’s initial plateau target of 1.2 million b/d.

The Iraqi Ministry of Oil has exerted pressure in recent weeks on the developers of several fields in Dhi Qar Governorate, most notably Al-Gharraf and Nasiriyah. In the context of a crude oil production target of 6 million barrels per day, the Japanese Oil Ministry called on Japex to accelerate its work to increase production at 1 billion + barrels of oil reserves in the Al-Gharf field, up from 90,000 barrels per day to at least 230,000 barrels per day. . This was the original plateau figure, after the initial target of 35,000 b/d was reached. As an incentive, good progress in Al Garraf will be viewed favorably by the Iraqi Oil Ministry in awarding favorable development contracts for the nearby 4.36 billion barrel Nassiriya oil field.

These increases, although they would allow Iraq to achieve its 6 million bpd goal, are somewhat dwarfed when considering the second question: Can more be done? The answer here, again, is yes. In 2013, Iraq launched the Integrated National Energy Strategy (INES), which formulated the three future oil production profiles for Iraq. The best-case scenario for INES was for crude oil production capacity to increase to 13 million barrels per day (at that point by 2017), peaking at that level until 2023, and then finally declining gradually to around 10 million barrels per day for a sustained long period. after that. The medium-range production scenario for Iraq was 9 million barrels per day (at that point by 2020), and the worst-case scenario was for Iraq to reach 6 million barrels per day (at that point by 2020).

These figures were based on solid facts and figures from several well-known and reliable external sources, as well as deeply analyzed in My new book on global oil markets. According to a limited-distribution report released by the International Energy Agency (IEA) around the same time, a detailed 1997 study by respected oil and gas company, Petrolog, had already provided numbers in line with subsequent Iraqi Oil Ministry statements. The country’s undiscovered resources amount to about 215 billion barrels. Even using the most conservative numbers, according to the International Energy Agency in 2012/2013, Iraq at the time had produced only about 15 percent of its ultimate recoverable oil resources, compared to 23 percent for the Middle East as a whole, More exploration and development was: “It is likely to add significantly to the figure of proven reserves over the coming decades, particularly given the high success rate of Iraq’s drilling prospects.”

The third and final question then: Is it done, that is, 6 million barrels a day and then production much higher than that? In the first figure, yes, for the reasons described above. In the second figure, everything depends on the proper construction of the Combined Sea Water Supply Project (CSSP) which is infinitely delayed. As evidenced by the limited but highly successful water projects in Rumaila and Zubair, the CSSP project – which involves taking and treating 12.5 million barrels per day of seawater from the Persian Gulf and then transporting it via pipelines to six oil production facilities to inject water to increase pressure in these major reservoirs – Necessary to achieve significant increases in Iraq’s production of crude oil, by more than 6 million barrels per day.

For this purpose, the only company in the world that has demonstrated the ability to finance and complete such a technically and logistically challenging hydrocarbon project within a deadline is the US company ExxonMobil. For this company to return to CSSP, from which it removed itself for reasons Deeply Analyzed by OilPrice.comIt would require a fundamental change – at least for this project if there are no others – in its culture of corruption Many elements have penetrated the Iraqi oil sector (and many other sectors) over many years. This has been repeatedly highlighted by OilPrice.com and independently over many years by Transparency International (TI) in various “Corruption Perceptions Index” publications, in which Iraq typically appears in the 10 worst out of 180 countries out of 180 in terms of its size and scope. corruption. Transparency International states that “massive embezzlement, procurement fraud, money laundering, oil smuggling and pervasive bureaucratic bribery have led the country to the bottom of international corruption ratings, fueled political violence and impeded effective state building and service delivery.” The report concludes that “political interference in anti-corruption bodies, politicization of corruption issues, weak civil society, insecurity, lack of resources, and incomplete legal provisions severely limit the government’s ability to efficiently curb rising corruption.”

Written by Simon Watkins for Oilprice.com

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