LONDON, (Reuters) – Problems with security, political instability and poor infrastructure mean plans by Iraq to expand its crude oil production dramatically over the next few years are overambitious, oil executives told an industry conference.
Iraq is sitting on some of the biggest proven oil reservoirs in the world, which Iraqi officials said last week were as high as 143 billion barrels, giving it the world’s fourth-largest reserves after Saudi Arabia, Venezuela and Iran.
But it will take many years for the country to turn those vast resources into extra oil production.
Iraqi output is now around 2.4 million barrels per day (bpd) and few oil executives see big additions to that production over the next few years — far short of a stated goal of 4 million bpd within three years and 12 million in seven years.
“Big capacity projections are improbable,” said Peter Wells, of Neftex Petroleum Consultants. “Projections for investment in drilling are well in excess of capability in the medium term and (a) rapid-build up is not needed.”
Wells said Iraq was a unique oil prospect, but a rapid increase in output would be very difficult to accomplish.
“There’s nothing like Iraq left in the world,” Wells said. “It is the single most important new supply increment.”
Iraqi Deputy Oil Minister Abdul Kareem Luaibi told Reuters last month Iraq could raise oil output to 4 million bpd by 2013 and it has signed contracts with foreign companies to increase capacity to 12 million bpd within seven years, which would make it a close rival to Saudi Arabia.
The extra oil will flow from the nine oilfields Iraq auctioned last year, including Rumaila, Zubair, West Qurna, and Majnoon. They are being developed by oil majors such as Britain’s BP, Italy’s ENI Exxon Mobil, Russia’s Lukoil and Royal Dutch Shell.
But Iraq lacks the cash and political leadership required to finance and manage such an output increase, oil executives say.
Iraq held a general election in March that produced no outright winner and it still has no new government.
Shortages of water, cash to build storage facilities and onshore pipelines, corruption and security problems are all major hurdles, former oil minister Issam Al-Chalabi said.
“I have yet to find an international company that believes Iraq will reach 12 million bpd,” Chalabi said, adding that 6 million bpd looked more feasible.
Sadad Al-Husseini, president of Husseini Energy and former vice president and member of the board at Saudi Aramco, agreed.
“Rates of 12.2 million bpd are not sustainable. A best estimate of 6.3 million bpd is achievable in seven to eight years,” he said, adding:
“Without security, none of these projects will go through.”
Oil analysts say some of the optimistic talk from Iraq over higher output is designed to bolster its case for an eventual OPEC production target that is higher than many other members.
Iraq is the only one of the 12 members of the Organization of the Petroleum Exporting Countries that has no output target following years of sanctions and war.
OPEC members have been set output targets for many years in an attempt to balance supply and demand and keep prices steady.
Tough talks are likely in future on Iraq’s reincorporation into OPEC output allocations, but it is not expected to get targets for several years.