Iraqs capital expenditure on the oil and gas sector is expected to reach a peak of $38.6bn in 2014, and total more than $450bn by the end of 2030, according to its recently completed energy strategy study.
The Iraq National Energy Strategy (INES) report was completed in April by US consultants Booz & Co, but still has not been made public. It outlines the countrys energy sector outlook for the next two decades.
Meeting the strategys recommendations will require the investment of about $600bn until 2030, with more than 80 per cent of the spending borne by the Iraqi government, in the form of capital expenditure and payments to international oil companies (IOCs). This is of course dependent on which course of oil production Iraq follows. The $600bn investment figure is based on oil production reaching 9 million barrels a day (b/d) by 2020.
Upstream spending includes the development of oil and gas fields operated by Iraqs state-owned oil firms, as well as the payment of reimbursements and remuneration fees to IOCs for their production. It also includes capital and operating expenditure for infrastructure such as the Common Seawater Supply Facility (CSSF) project.
The figure is expected to rise from $12bn in 2012 to a peak of $21bn in 2020, when the oil fields reach their plateau production levels. Total spending is expected to reach about $275bn by 2030.
Implementing the downstream strategy, which covers both refineries, pipelines, storage depots and export infrastructure, will come at a cost of $75bn from now to 2030. This is expected to peak in 2016 at $13bn before dropping to just $500m a year by 2022.
Just over half the total spending will cover the refining sector, through Iraqs plans to build five new grassroots refineries and expand its capacity by more than 700,000 b/d to 1.5 million b/d. About 46 per cent of the total will be invested in oil evacuation infrastructure, such as the planned Iraq-Jordan pipeline, the rehabilitation of the Iraq-Turkey pipeline and new pipelines across the country. However, again, Iraq will bear the majority of the costs at 67 per cent.
Finally, the natural gas sector adds another $105bn in expenditure up to 2030. This covers the development of export facilities for liquefied natural gas (LNG) or liquid petroleum gas (LPG), gas pipelines, gas processing and gathering facilities and the development of non-associated gas fields.
The spending should peak at $16bn in the next few years as Iraq builds new gas gathering and processing facilities to finally put an end to the wasteful practice of flaring associated gas. Further ahead, the development of non-associated fields, such as the existing Akkas, Siba and Mansuriya fields, along with new fields discovered at the countrys awarded exploration blocks will form the bulk of spending.
Despite the huge size of the investments however, this could generate revenues of $6 trillion over the period, with the majority coming from crude oil exports.